Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 15

Value Chain and Classification of Costs

Apple, Inc. incurs many types of costs in its operations.

Required

For each cost in the following table, identify the stage in the value chain where this cost is incurred.

Cost		Stage In the Value Chain
Programmer costs for a new operating system	1.	Design
Costs to ship computers to customers	2.	Marketing
Call center costs for support calls	3.	Distribution
Salaries for employees working on new product designs	4.	Research and development
Costs to purchase advertising at university stores	5.	Customer service
Costs of memory chips to make computers	6.	Production

Step 1 of 7

Accounting systems

Purpose of creating accounting information system is to provide information for decision making of accounting users. Users can be classified as primary users like investors, government, creditors etc. and secondary users like internal including managers or employees. Accounting systems are also classified as financial and costing accounting system also differentiate between the users like primary and secondary ones.

Cost accounting

This system is designed for inhouse or internal managers and their decision making. Cost accounting information is not needed for comparison with other companies. This information is commonly used in financial accounting also, but it is primarily used by company managers for their decision making. It is important that cost accounting information is relevant for the decision making of the manager.

Value chain

Value chain are the different stages of production or service delivery process that add value to a product or service and organization like research and development, design, purchasing, production, marketing, distribution, customer service, ERP etc. Each element of chain is unique and add value in different manner.