Question
Fact Pattern: A company wants to determine its marketing costs for budgeting purposes. Activity measures and costs incurred for 4 months of the current year
Fact Pattern:
A company wants to determine its marketing costs for budgeting purposes. Activity measures and costs incurred for 4 months of the current year are presented in the table below. Advertising is considered to be a discretionary cost. Salespersons are paid monthly salaries plus commissions. The sales force was increased from 20 to 21 individuals during the month of May.
March | April | May | June | |||||
| | | | |||||
Activity measures: | ||||||||
Sales orders | 2,000 | 1,800 | 2,400 | 2,300 | ||||
Units sold | 55,000 | 60,000 | 70,000 | 65,000 | ||||
Dollar sales | $1,150,000 | $1,200,000 | $1,330,000 | $1,275,000 | ||||
Marketing costs: | ||||||||
Advertising | $ 190,000 | $ 200,000 | $ 190,000 | $ 190,000 | ||||
Sales salaries | 20,000 | 20,000 | 21,000 | 21,000 | ||||
Commissions | 23,000 | 24,000 | 26,600 | 25,500 | ||||
Shipping costs | 93,000 | 100,000 | 114,000 | 107,000 | ||||
| | | | |||||
Total costs | $ 326,000 | $ 344,000 | $ 351,600 | $ 343,500 | ||||
| | | |
Which of the following most appropriately describes the classification and behavior of shipping costs?
Classification | Behavior | ||
| |
a. Variable cost | $1.66 per unit sold |
b. Mixed cost | $30,000 per month plus $35.00 per sales order |
c. Mixed cost | $58,000 per month plus $23.33 per sales order |
d. Mixed cost | $16,000 per month plus $1.40 per unit sold |
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