Suppose Motor Shack incurred the following costs at its Ann Arbor, Michigan, store:

Newspaper advertisements ………………………………………………………………… $ 5,100

Payment to consultant for advice on location of new store ……………………… $ 2,700

Purchases of merchandise ………………………………………………………………. $ 3 7,000

Freight-in ………………………………………………………………………………………….. $ 3,700

Salespeople’s salaries ……………………………………………………………………….. $ 4,600

Depreciation expense on delivery trucks ………………………………………………. $ 1,500

Research on whether store should sell satellite radio service …………………….. $ 250

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

Rearranging store layout ………………………………………………………………………. $ 650

Requirements

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

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

3. How much are the total product costs?



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