Classify costs along the value chain Rootstown 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...


Classify costs along the value chain


Rootstown 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, the company dilutes the mixture with carbonated water. Rootstown Cola incurs the following costs (in thousands):


Requirements


1. Classify each of the listed costs according to its category in the value chain (R&D, Design, Production, Marketing, Distribution, or Customer Service).


2. Further break down production costs into three subcategories: Direct Materials (DM), Direct Labor (DL), or Manufacturing Overhead (MOH).


3. Compute the total costs for each value chain category.


4. How much are the total inventoriable product costs?


5. 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?

Nov 25, 2021
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