Costs May Be Classified in a Variety of Ways Required:
Classify Each of the Above Costs as Being an Classifies

question 2

Essay

Costs may be classified in a variety of ways.One approach classifies costs into three categories,manufacturing,upstream,and downstream.These costs are sometimes referred to as an organization's value chain.Costs incurred by the Branscome Bicycle Company are described in the following table:
$$\begin{array} { | l | l | l | l | l | } \hline & \text { Decription of Cost } & \text { Upstream } & \text { Manufacturing } & \text { Downstream } \\\hline 1 & \text { Depreciation on the finished goods warehouse } & & & \\\hline 2 & \text { Cost of bicycle chains } & & & \\\hline 3 & \text { Cost of testing a new prototype } & & & \\\hline 4 & \text { Research and development costs } & & & \\\hline 5 & \text { Salary cost of the Vice President of Research } & & \\\hline 6 & \text { Sales commissions } & & \\\hline 7 & \text { Transportation costs for shipping bikes to retailers } & & & \\\hline 8 & \text { Costs of indirect materials such as bicycle chain oil } & & & \\\hline 9 & \text { Costs of customer service representatives } & & & \\\hline 10 & \text { Labor costs of plant manager } & & & \\\hline 11 & \text { Rent costs for the factory } & & & \\\hline 12 & \begin{array} { l } \text { Depreciation of machinery used to test new } \\\text { manufacturing procedures }\end{array} & & & \\\hline 13 & \text { Labor costs of production employees } & & & \\\hline 14 & \text { Costs of advertising the company's products } & & & \\\hline\end{array}$$ Required:
Classify each of the above costs as being an upstream,manufacturing,or downstream cost by inserting a check mark in the appropriate column.

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Definitions:

Distribution

In statistics, the way in which values of a variable are spread or dispersed across possible values.

Contribution Margin

The amount remaining from sales revenue after all variable expenses have been deducted, indicating the contribution towards covering fixed costs and generating profit.

Scarce Resource

An economic term referring to a resource that has limited availability in relation to its demand, leading to allocation decisions.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.