Chapter Nine
Interactive Exercise –
Business Product Classes
Instructions for the Professor:
Overview:
The purpose of this exercise is to help students learn how to differentiate
between the different business product classifications based on the intended use
of a product within an organization. Five business product purchase / usage
situations are described; students are challenged to identify the correct business
product classification for each example using a simple drag and drop exercise.
Concept Review:
It may be beneficial to begin the exercise by reviewing the difference between
business and consumer products. Students frequently try to “type” or classify
products on the basis of the attributes or benefits provided. Confusion is
inevitable when using this system as identical products can often be classified as
either a consumer or a business good. For example, microwave ovens are
common household appliances, yet they are frequently purchased by many
organizations for use in the company break room. The benefits provided to both
groups are the same. It should be emphasized that consumer products are those
that are used by the ultimate or final consumer in the running / management of a
household, while business products are goods and services purchased by
organizations and used in the manufacturing process (installations, raw
materials, components) or in the running of the business (accessories, supplies,
professional services).
Business products may be classified as installations, accessories, raw materials,
components, supplies, or professional services. Differentiating between
installations and accessories is often difficult for students. Generally speaking,
installations represent major capital outlays (as perceived by the organization)
and thus are more expensive than accessories, more likely to be customized,
more likely to be depreciated over time vs. expensed in the year of purchase and
are often leased. Supplies should be differentiated from components by
explaining that components ultimately become part of a manufactured product,
while supplies are used in the maintenance, repair, or operation of equipment
that is used in the general running of the business or in the manufacturing
process. It should also be stressed that components have been processed to at
least some extent, while raw materials include unprocessed ores, fruits,
vegetables, fish, etc.
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Using the Exercise:
Initial Screen:
1. This screen introduces the six classifications of business
products in a 3 x 2 table grid.
 Each table cell will transition briefly by changing color or pulsing in
some fashion.
 To begin the exercise the professor clicks anywhere on the screen.
Clicking within a particular cell is not necessary.
The exercise will automatically transition to the next drop and drag
screen.
Next Screen:
2. Drop and drag screen #1 appears. A purchase scenario
statement is shown above the 3 x 2 table grid.
 The professor reads the purchase scenario statement to the class.
The professor then challenges students to determine the correct
business product classification exemplified by the purchase
scenario under consideration.
 The professor clicks on the purchase scenario statement to activate
it, and holding down the left-hand mouse button, drags the
statement on top of the table cell pertaining to the student’s
response. When the statement is positioned over the selected cell,
the professor releases the mouse button.
 If the wrong response is given, a buzzer will sound and the
statement will move back to its position above the table. For details
related to right and wrong answers, refer to the ANSWERS AND
EXPLANATION section below.
The drop and drag selection process is repeated until the correct
answer is chosen. When this happens, the statement will appear to
“stick” to the correct table cell and a cash register “Ch-ching!”
sound will be heard. The slide automatically transitions to the next
drop and drag screen as described below in step 3.
Next Screen:
3. The second Drop and Drag Screen appears.
 A new purchase scenario appears above the 3 x 2 business
product classification table.
 The purchase scenario previously explored is now integrated into
the correct table cell.
 The background color of the completed table cell is displayed in a
different color to indicate to students that it should no longer be
considered as an alternative for future classifications.
 The professor repeats the drop and drag selection process
described in step #2.
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Next Several Screens
4. The selection processes described in steps 2 and 3 are
repeated until each of the five purchase scenarios has been
investigated.
Final Screen
5. The final screen matches each purchase scenario to the correct
business product classification. Since the answer for a final
item would be apparent (given only one empty cell), the final
cell, “accessories,” lists a few traits that distinguish this type of
good from installations.
6. The professor clicks the “X” icon in the upper left hand corner of
the screen to end the exercise.
Answers and Explanations
UNIVERSITY ORDERS TONER FOR LAB PRINTERS
CORRECT ANSWER: SUPPLIES
Some students may argue that toner cartridges are better classified as
component goods because they become part of a larger purchase. If the
purchasing organization were Hewlett-Packard, and the toner cartridges were
being incorporated into new laser printers manufactured by that company
then they would indeed be considered component goods. However, in the
context described, toner cartridges represent consumable goods -- supplies -that must be purchased semi-regularly by the University in order to ensure the
continued operation of the computing lab printers.
RESTAURANT CHEF SELECTS & BUYS MUSHROOMS
CORRECT ANSWER: RAW MATERIALS
If confusion occurs it is most likely that students will incorrectly type
mushrooms as a component good rather than as a raw material. The fact that
the chef personally selects the mushrooms from a local grower indicates that
this agricultural product has not been “processed” in any way. As a form of
unprocessed produce, mushrooms purchased directly from a grower
represent a raw material that must be washed and possibly capped, cut,
sliced, minced, dried, sautéed or otherwise “processed” prior to their eventual
incorporation in a meal. While mushrooms may retain their identity after
processing (mushrooms presented as an appetizer) they often will not
(ingredients in a sauce or stuffing).
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HONDA BUYS SPARK PLUGS
CORRECT ANSWER: COMPONENTS
Spark plugs are finished items that require no additional processing prior to
becoming part of the motorcycle. Spark plugs retain their identity after
inclusion in the motorcycle and will need to be replaced several times over
the life of the bike. In the situation described, Honda represents an original
equipment manufacturer; the parts department for Honda would be an
example of the replacement market.
PET STORE HIRES ACCOUNTANTS TO PERFORM AUDIT
CORRECT ANSWER: PROFESSIONAL SERVICES
Accounting services such as auditing support the firm’s operations.
Professional services are typically the easiest type of business product to
identify.
POLICE FORCE BUYS CAR FLEET
CORRECT ANSWER: INSTALLATION
The students may argue that the book says that the text describes
installations as buildings and one-of-a-kind installations. However, the text
goes explains that one-of-a-kind installations can include custom made
machines. Police patrol cars are typically customized in terms of appearance
(paint color schemes, flashing light bars) and may also be modified via
structural body reinforcements, specialized equipment (in-dash computers or
video recording equipment) or more powerful engines. Although the average
life of patrol cars is not as long as many other forms of installations, the high
level of customization and complex negotiations that accompany such a
purchase suggest that this example is best classified as an installation good
rather than as an accessory.
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