, PLEASE USE THIS DOCUMENT AS A GUIDE TO ANSWER YOUR ASSIGNMENT
TRL3707 ASSIGNMENT 3 SEMESTER 1 2026
ANSWERS
DUE DATE : APRIL 2026
1.1 Cost Classifications Relevant to Famous Fishing (Pty) Ltd
Cost Classification in Logistics Operations
Cost classification in logistics refers to the systematic grouping of costs according to their behaviour,
function, and relationship to operational activities within the supply chain. For a company such as
Famous Fishing (Pty) Ltd, which operates in a temperature-sensitive and time-critical seafood
supply chain, cost classification is essential for controlling distribution efficiency, reducing wastage,
and improving profitability. In logistics systems, costs are generally classified into fixed and
variable costs, direct and indirect costs, and inventory-related costs such as ordering, holding, and
shortage costs. These classifications assist managers in understanding how costs respond to
operational decisions such as storage duration, transportation mode, and inventory levels (Chopra &
Meindl, 2016).
Fixed and Variable Costs in the Context of Famous Fishing (Pty) Ltd
Fixed costs remain constant regardless of the level of output or distribution activity. For Famous
Fishing (Pty) Ltd, these would include warehouse lease agreements, refrigeration infrastructure,
salaries of permanent logistics staff, and depreciation of cold storage facilities. These costs are
incurred even when fish stock movement is low, making them critical in long-term financial
planning. In contrast, variable costs fluctuate with operational activity. These include fuel costs for
refrigerated transport, packaging materials for seafood products, electricity usage in cold storage
dependent on stock levels, and overtime wages during peak fishing seasons. According to Bowersox,
Closs and Cooper (2020), distinguishing between fixed and variable logistics costs enables firms to
improve cost-volume-profit analysis and make informed operational scaling decisions.
Direct and Indirect Costs in Cold Chain Logistics
Direct costs are those that can be clearly traced to a specific logistics activity or product. In Famous
Fishing (Pty) Ltd, direct costs include transport costs per delivery route, ice and preservation
materials used per consignment, and handling costs for specific seafood batches. Indirect costs,
however, cannot be directly allocated to a single activity and are shared across operations. These
include warehouse security, administrative overheads, insurance for cold storage facilities, and
general facility maintenance. Proper allocation of indirect costs is essential in seafood logistics
because misallocation can distort product profitability, especially when dealing with multiple fish
species with different storage requirements (Rushton, Croucher & Baker, 2017).
Inventory-Related Cost Classifications: Ordering, Holding, and Shortage Costs
TRL3707 ASSIGNMENT 3 SEMESTER 1 2026
ANSWERS
DUE DATE : APRIL 2026
1.1 Cost Classifications Relevant to Famous Fishing (Pty) Ltd
Cost Classification in Logistics Operations
Cost classification in logistics refers to the systematic grouping of costs according to their behaviour,
function, and relationship to operational activities within the supply chain. For a company such as
Famous Fishing (Pty) Ltd, which operates in a temperature-sensitive and time-critical seafood
supply chain, cost classification is essential for controlling distribution efficiency, reducing wastage,
and improving profitability. In logistics systems, costs are generally classified into fixed and
variable costs, direct and indirect costs, and inventory-related costs such as ordering, holding, and
shortage costs. These classifications assist managers in understanding how costs respond to
operational decisions such as storage duration, transportation mode, and inventory levels (Chopra &
Meindl, 2016).
Fixed and Variable Costs in the Context of Famous Fishing (Pty) Ltd
Fixed costs remain constant regardless of the level of output or distribution activity. For Famous
Fishing (Pty) Ltd, these would include warehouse lease agreements, refrigeration infrastructure,
salaries of permanent logistics staff, and depreciation of cold storage facilities. These costs are
incurred even when fish stock movement is low, making them critical in long-term financial
planning. In contrast, variable costs fluctuate with operational activity. These include fuel costs for
refrigerated transport, packaging materials for seafood products, electricity usage in cold storage
dependent on stock levels, and overtime wages during peak fishing seasons. According to Bowersox,
Closs and Cooper (2020), distinguishing between fixed and variable logistics costs enables firms to
improve cost-volume-profit analysis and make informed operational scaling decisions.
Direct and Indirect Costs in Cold Chain Logistics
Direct costs are those that can be clearly traced to a specific logistics activity or product. In Famous
Fishing (Pty) Ltd, direct costs include transport costs per delivery route, ice and preservation
materials used per consignment, and handling costs for specific seafood batches. Indirect costs,
however, cannot be directly allocated to a single activity and are shared across operations. These
include warehouse security, administrative overheads, insurance for cold storage facilities, and
general facility maintenance. Proper allocation of indirect costs is essential in seafood logistics
because misallocation can distort product profitability, especially when dealing with multiple fish
species with different storage requirements (Rushton, Croucher & Baker, 2017).
Inventory-Related Cost Classifications: Ordering, Holding, and Shortage Costs
