Value chain and classification of costs, a computer
company. Dell Computer incurs the following costs:
a. Utility costs for the plant assembling the Latitude computer line of products
b. Distribution costs for shipping the Latitude line of products to a retail chain
c. Payment to David Newbury Designs for a design of the XPS 2-in-1 laptop
d. Salary of computer scientist working on the next generation of servers
e. Cost of Dell employees’ visit to a major customer to demonstrate Dell’s ability to interconnect with other computers
f. Purchase of competitors’ products for testing against potential Dell products
g. Payment to business magazine for running Dell advertisements
h. Cost of cartridges purchased from outside supplier to be used with Dell printers
Required:
Classify each of the cost items (a–h) into one of the business functions of the value chain.
Why do managers consider direct costs to be more accurate than indirect costs?
Define variable cost and fixed cost. Give an example of each.
a. Utility costs for the plant assembling the Latitude computer line of products
b. Distribution costs for shipping the Latitude line of products to a retail chain
c. Payment to David Newbury Designs for a design of the XPS 2-in-1 laptop
d. Salary of computer scientist working on the next generation of servers
e. Cost of Dell employees’ visit to a major customer to demonstrate Dell’s ability to interconnect with other computers
f. Purchase of competitors’ products for testing against potential Dell products
g. Payment to business magazine for running Dell advertisements
h. Cost of cartridges purchased from outside supplier to be used with Dell printers
Required:
Classify each of the cost items (a–h) into one of the business functions of the value chain.
Why do managers consider direct costs to be more accurate than indirect costs?
Define variable cost and fixed cost. Give an example of each.
