Suppose Electronics Shack incurred the following costs at its Forest Lake, Minnesota, store.

Newspaper advertisements ………………………………………………………………….. $ 5,700

Payment to consultant for advice on location of new store ………………………… $ 2,100

Purchases of merchandise ………………………………………………………………….. $ 36,000

Freight-in …………………………………………………………………………………………….. $ 3,500

Salespeople’s salaries ………………………………………………………………………….. $ 4,100

Depreciation expense on delivery trucks …………………………………………………. $ 1,100

Research on whether store should sell satellite radio service ……………………….. $ 500

Customer Complaint Department ……………………………………………………………… $ 550

Rearrangement of store layout …………………………………………………………………. $ 900

Requirements

1. Classify each cost as to which category of the value chain it belongs (R&D, Design, Purchases, Marketing, Distribution, Customer Service).

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

3. How much are the total product costs?



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