Final answer:
Labor costs for workers in a manufacturing plant are classified under production, while transportation costs to ship products to retail outlets fall under the distribution phase of the value chain.
Step-by-step explanation:
The classification of each cost item into business functions of the value chain involves assigning costs to the areas they are most associated with. In this case, the labor cost of workers in the manufacturing plant is best classified under production, as it directly relates to creating the product. Conversely, transportation costs for shipping products to retail outlets are associated with the distribution phase, as this is the part of the value chain responsible for delivering the products to their point of sale or directly to customers.
Understanding these classifications helps businesses in analyzing their costs and improving efficiency. Accurate assignment of costs aids in understanding how value is added at each stage of production and how the specialization of different sections within the global economy assists in streamlining processes and fostering international trade that is characterized by the exchange of more specialized goods rather than whole finished products.