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?
Answer to relevant QuestionsFill in the blanks for each of the following independentcases:Which of the following are step costs? Why?a. Rent on a warehouse that is large enough for all anticipated ordersb. Teachers for a private elementary school; one teacher is needed for every 15 studentsc. Sheet steel for a ...Study Appendix 2B. Suppose Wooliscroft Construction Company has a 32% income tax rate, a contribution-margin ratio of 45%, and fixed costs of $664,000. What sales volume is necessary to achieve an after-tax income of ...Joann Swanson owns and operates a restaurant. Her fixed costs are $17,000 per month. She serves luncheons and dinners. The average total bill (excluding tax and tip) is $18 per customer. Swanson’s present variable costs ...Most companies compensate their sales forces with a combination of a fixed salary and a commission that is a percentage of sales. Consider two companies competing for the same customers—for example, Kellogg’s and Post ...
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