Question 4: Briefly describe value chain analysis and how value chain analysis can improve the profitability of a company.

Question 5: Discuss what Blue Ridge is likely to gain from a value chain analysis. What are some of the opportunities for cost reduction and for value added for the customers?

Question 2: Discuss the advantages and disadvantages of volume-based costing method, activity-based costing, and time driven activity-based costing.

Question 3: What type of cost system does Blue Ridge use, and is it consistent with their strategy?

Blue Ridge Manufacturing Background: Blue Ridge Manufacturing is one of a dozen companies that produces and sells towels for the U.S. "sports towel" market. A "sports towel" is a towel that has the promotion of an event or a logo printed on it. They're called sports towels because their most popular use is for distribution in connection with major sporting events such as the Super Bowl, NCAA Final Four, Augusta National Golf Tournament and the U.S. Open Tennis Tournament. Towels with college, NBA and NFL team logos, and promotions for commercial products such as soft drinks, beer, fast food chains, etc., are also big sellers. The firm designs, knits, prints and embroiders towels. The firm knits all the towels it sells and tracks costs for towel production separately from the cost to customize the towels. Seventy-five percent of its orders include logo design, while the balance are print only and require the payment of a license fee for the logo used. However, about 15% of its orders include embroidery. Towels are made in three sizes: regular (18" x 30"), hand (12" x 20") and mid-range (15"x 24"). The normal production cycle for an order of white towels is three days. If a customer wants a colored towel, the basic white towel made by Blue Ridge is sent to a dyeing firm, which extends the production cycle of an order by three days. Also, occasionally, customers order