Classify costs along the value chain (Learning Objectives 2, 4)

ShaZam Cola produces a lemon-lime soda. The production process starts with workers mixing the lemon syrup and lime flavors in a secret recipe. The company enhances the combined syrup with caffeine. Finally, ShaZam dilutes the mixture with carbonated water. ShaZam Cola incurs the following costs (in thousands):

Requirements 1. Lise the following format to classify each of these costs according to its place in the value chain. (Hint: You should have at least one cost in each value-chain function.)

2. Compute the total costs for each value-chain category.
3. How much are the total inventoriable product costs?
4. Suppose the managers of the R&D and design functions receive year-end bonuses based on meeting their unit’s target cost reductions. What are they likely to do? How might this affect costs incurred in other elements of the value chain?

Plant utilities.... Depreciation on plant and equipment.... Payment for new recipe.. Sal............. Replace products with expired dates upon customer complaint......... Rearranging plant layout....... Lemon syrup. Lime flavoring....... Production costs of "cents-off" store coupons for customers Delivery truck drivers' wages Bottles....... Sales commissions $ 750 3,000 1,000 25 50 1,100 18,000 1,000 600 250 1,300 400 1,000 Plant janitors' wages Wages of workers who mix syrup Customer hotline.......... Depreciation on delivery trucks....... Freight-in on materials. Total........... 8,000 200 150 1,500 $38,325