Southwoods is a medium-sized accounting firm that provides services in the areas of audit, taxation and investment advice. Apply value chain and other classifications to the costs listed below. (More than one classification may be appropriate for each cost item.) What role might this approach to cost classification play in the management process?
Cost classifications:
(a) Research and development.
(b) Design.
(c) Production/delivery.
(d) Marketing.
(e) Customer support.
(f) Fixed costs.
(g) Variable costs (identify cost driver).
(h) Professional labour.
(i) Overheads.
Costs:
1. Salaries of staff who work directly on audit assignments.
2. Salary of the financial planning consultant who provides investment advice to retirees.
3. Salary of a research assistant who investigates and develops new financial planning products.
4. Salary of the receptionist.
5. Costs of advertising financial planning products.
6. Cost of telephone calls. These relate primarily to follow-up calls to taxation clients.
7. Depreciation on photocopiers used in the provision of all services.
8. Cost of preprinted stationery used in the preparation of taxation returns.
9. Salaries of staff who are directly involved in the preparation of taxation returns.
10. Depreciation on office computing equipment used in the provision of all services.