iework Spring $2024$

$\frac{2}{3}$

$100\%$

$2-23$ Classification of costs, service sector. Market Focus is a marketing research firm that organizes focus groups for consumer$-$product companies. Each focus group has eight individuals who are paid $$60$ per session to pruvide comments on new products. These focus groups meet in hotels and are led by a trained, independent marketing specialist hired by Market Focus. Each specialist is paid a fixed retainer to conduct a minimum number of sessions and a per session fee of $$2,200.$ A Market Focus staff member attends each session to ensure that all the logistical aspects run smoothly.

Classify each cost item $(A-H)$ as follows:

a$.$ Direct or indirect $(D$ or I costs of each individual focus group.

b$.$ Variable or fixed $($V or F$)$ costs of how the total costs of Market 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:

Dor I Vor F

Cost Item

A$.$ Payment to individuals in each focus group to provide comments on new products

B$.$ Annual subscription of Market Focus to Consumer Reports magazine

C$.$ Phone calls made by Market Focus staff member to confirm individuals will attend a focus group session $($Records of individual calls are not kept$)$

D$.$ Retainer paid to focus group leader to conduct $18$ focus groups per year on new medical products

E$.$ Recruiting cost to hire marketing specialists

F$.$ Lease payment by Market Focus for corporate office

G$.$ 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.$)$

H$.$ Gasoline costs of Market Focus staff for company$-$owned vehicles $($Staff members submit monthly bills with no mileage breakdowns.$)$

I. Costs incurred to improve the design of focus groups to make them more effective