Chapter 2, Problem 2.30BE

Classify costs along the value chain for a retailer (Learning Objective 2)

Suppose Electronics Shack incurred the following costs at its Forest Lake, Minnesota, store.

Newspaper advertisements	$ 5,700
Payment to consultant for advice on location of new store	$ 2,100
Purchases of merchandise	$36,000
Freight-in	$ 3,500
Salespeople’s salaries	$ 4,100
Depreciation expense on delivery trucks	$ 1,100
Research on whether store should sell satellite radio service	$ 500
Customer Complaint Department	$550
Rearrangement of store layout	$900

Requirements

1. 1. Classify each cost as to which category of the value chain it belongs (R&D. Design, Purchases, Marketing, Distribution, Customer Service).
2. 2. Compute the total costs for each value chain category.
3. 3. How much are the total product costs?