Question

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Answer 1

Deam Cola Value Chain Cost Classification Production Direct Direct R&D Design Materials Labor Cost Marketing Distribution Mfg. Overhead $900 Customer Service $295 $820 $325 $550 $1,210 $1,000 $1,110 Plant janitors' wages Delivery-truck drivers' wages Payment for new recipe Depreciation on delivery trucks Plant utilities Lime flavoring Rearranging plant layout Bottles Salt Sales commissions Production costs of "cents-off" store coupons for customers Lemon syrup Replace products with expireddates Depreciation on plant and equipment Wages of workers who mix syrup Customer hotline Totals $500 $630 $20,000 $25 $2,600 $7,600 $820 $1,000 $22,320 $7,600 $4,105 $1,130 $620 $170 $195

Explanation: Product costs are those costs which are incurred at the factory level during production process which may be direct or indirect costs. Of which, variable product costs will change when production volume increases or decreases whereas fixed product costs do not change, unless there are some conditions that have the capability to decrease or cause to increase the same. Direct costs are those product costs that are directly attributable to products manufactured. In other words, these costs are avoidable costs in nature and are not expected to incur if there is no production. Examples are: Direct Materials (DM) and Direct Labor (DL) Indirect costs are also called as Mfg. Overhead Costs which are those product costs that are not directly attributable to any particular products manufactured. That is, these costs are common costs in nature and are incurred whether there is production or not. Examples are: Depreciation on plant, Plant utilities, etc. Period costs are those costs which are incurred outside the factory but for carrying out firm's selling and administrative related operating activities and financing activities. Of which, variable period costs will change when sales volume increases or decreases whereas fixed period costs do not change, unless there is particular condition that has the capability to decrease and cause to increase the same. Examples are: Marketing, Distribution, Customer Service, etc.