Consumer First is a marketing research firm that organizes focus groups for consumer-product companies. Each focus group has eight individuals who are paid P50 per session to provide comments on new products.

These focus groups meet in hotels and are led by a trained, independent, marketing specialist hired by Consumer First. Each specialist is paid a fixed retainer to conduct a minimum number of sessions and a per session fee of P2,000. A Consumer First staff member attends each session to ensure that all logistical aspects run smoothly.

Classify each of the following cost item as:

a.Direct or indirect (D or I) cost with respect to each individual focus group.

b.Variable or fixed (V or F) costs with respect to how the total cost of Consumer Focus change as the number of focus groups conducted changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the number of groups conducted.)

You will have two answers (D or I; V or F) for each of the following items:

Cost Item

- Payment to individuals in each focus group to provide comments on new product.

- Annual subscription on Consumer First to Consumer Reports Magazine.

- Phone calls made by Consumer First staff member to confirm individuals will attend a focus group session (records of individual calls are not kept).

- Retainer paid to focus group leader to conduct 20 focus groups per year on new medical products.

- Meals provided to participates in each focus group.

- Lease payment to Consumer First for corporate office.

- Cost of tapes used to record comments made by individuals in a focus group session (these tapes are sent to the company whose products are being tested).

- Gasoline costs of Consumer First staff for company-owned vehicles (staff members submit monthly bills with no mileage breakdown.

Answer rating: 100% (QA)

a Classification of cost items 1 Payment to individuals in each focus group to provide com... View the full answer