Johnson Advertising Agency Incurs the Following Costs in Its Service

question 56

Essay

Johnson Advertising Agency incurs the following costs in its service activities. Classify each one of them according to one of the value chain functions.
1. Amortization of the artist design desk.
2. Cost of computer time used to create designs for customers.
3. Cost of updating an ad for a customer.
4. Cost of computer time used by a salesperson.
5. Cost of changing an unsuccessful ad after client complains that ad targeted wrong customers.
6. Cost of materials used in the layout of a customer's magazine ad.

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Definitions:

Implicit Costs

Costs that represent foregone opportunities, such as the income a business owner forgoes by investing in their own company instead of elsewhere.

Explicit Costs

Directly incurred expenses in the operation of a business, such as wages, rent, and material costs, which are clearly accounted for and easy to identify.

Opportunity Costs

The potential benefits missed out on when choosing one alternative over another.

Explicit Costs

Direct, out-of-pocket payments for goods or services that are made by a business as part of its operations.