COST ACCOUNTING-Roxbury Mobile Company (RMC) is developing a new touch-screen smartphone

| January 30, 2017

Question
Roxbury Mobile Company (RMC) is developing a new touch-screen smartphone to compete in the cellular phone industry. The company will sell the phones at wholesale prices to cell phone companies, which will in turn sell them in retail stores to the final customer. RMC has undertaken the following activities in its value chain to bring its product to market:
Instructions:
Identify customer needs (What do Smartphone users want?)
Perform market research on competing brands
Design a prototype of the RMC Smartphone
Market the new design to cell phone companies
Manufacture the RMC Smartphone
Process orders from cell phone companies
Package the RMC Smartphone’s
Deliver the RMC Smartphone’s to the cell phone companies
Provide online assistance to cell phone users for use of the RMC Smartphone
Make design changes to the Smartphone based on customer feedback
During the process of product development, production, marketing, distribution, and customer service, RMC has kept track of the following cost drivers:
Number of Smartphone’s shipped by RMC
Number of design changes
Number of deliveries made to cell phone companies
Engineering hours spent on initial product design
Hours spent researching competing market brands
Customer-service hours
Number of Smartphone orders processed
Number of cell phone companies purchasing the RMC Smartphone
Machine hours required to run the production equipment
Number of surveys returned and processed from competing Smartphone users
1. Identify each value chain activity listed at the beginning of the exercise with one of the following value-chain categories:
a. Design of products and processes
b. Production
c. Marketing
d. Distribution
e. Customer Service
Cost Item Value Chain Business Function
Perform market research on competing brands
Design a prototype of the RMC Smartphone
Market the new design to cell phone companies
Manufacture the RMC Smartphone
Process orders from cell phone companies
Package the RMC Smartphone’s
Deliver the RMC Smartphone’s to the cell phone companies
Provide online assistance to cell phone users for use of the RMC Smartphone
Make design changes to the Smartphone based on customer feedback

2. Use the list of preceding cost drivers to find one or more reasonable cost drivers for each of the activities in RMC’s value chain.
Cost Item Cost Drivers
Number of Smartphone’s shipped by RMC
Number of design changes
Number of deliveries made to cell phone companies
Engineering hours spent on initial product design
Hours spent researching competing market brands
Customer-service hours
Number of Smartphone orders processed
Number of cell phone companies purchasing the RMC Smartphone
Machine hours required to run the production equipment
Number of surveys returned and processed from competing Smartphone users

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