Answer
a. Production
b. Distribution
c. Research and Development
d. Research and Development
e. Marketing
f. Research and Development
g. Marketing
h. Production
Work Step by Step
To classify the costs into the business functions of the value chain, I followed these steps:
Reviewed the eight cost items provided in the question.
Referenced Exhibit 1-2 on page 6 to identify the five business functions of the value chain: Research and Development, Design of Products and Processes, Production, Marketing, and Distribution.
Analyzed each cost item to determine which business function of the value chain it pertains to, based on the nature of the cost.
Classified each cost item into one of the five business functions of the value chain.
Based on these steps, I classified the costs as follows:
a. Electricity costs for the plant assembling the Presario computer line of products - Production
b. Transportation costs for shipping the Presario line of products to a retail chain - Distribution
c. Payment to David Kelley Designs for design of the Armada Notebook - Design of Products and Processes
d. Salary of computer scientist working on the next generation of minicomputers - Research and Development
e. Cost of Compaq employees’ visit to a major customer to demonstrate Compaq’s ability to interconnect with other computers - Marketing
f. Purchase of competitors’ products for testing against potential Compaq products - Research and Development
g. Payment to television network for running Compaq advertisements - Marketing
h. Cost of cables purchased from outside supplier to be used with Compaq printers - Production
