Question: Refer to Exhibits 2 2 and 2 3 on pages 38 and
Refer to Exhibits 2-2 and 2-3 on pages 38 and 39. Part of a company’s marketing function is as described in Exhibit 2-2. Two of the many marketing-function activities are advertising and selling. The annual cost behavior of the resources used to perform the selling activity is depicted in the following diagram. With respect to the cost driver sales dollars, which of the two costs is fixed? Which cost is variable? What is the total cost of the selling activity if sales dollars are $24,000,000? What is the total cost of selling if sales dollars are $12,000,000? Does the total cost of selling decrease by half in response to a 50% decrease in the cost driver level? Why or whynot?
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