Question
Melbourne Manufacturing (MM) is a firm which manufactures and sells multiple products directly to the public via e-commerce platforms. MM has recently hired an external
Melbourne Manufacturing (MM) is a firm which manufactures and sells multiple products directly to the public via e-commerce platforms. MM has recently hired an external digital marketing consulting (EDMC) firm. EDMC's consulting fee that it charges MM is calculated based solely on the sales units MM achieves. Specifically, the fee EDMC will be paid (in dollars) = 20% x MM's total sales units.
Which of the following statements about MM's marketing costs (paid to EDMC) is/are likely to be true?
1. According to the relevant accounting standards, this cost would be included in MM's value of inventory on the balance sheet.
2. This cost will be classified as a variable cost instead of a fixed cost.
3. The amount of marketing cost that should be assigned to a particular product is equal to 20% x total sales units of that product
Group of answer choices
A. Statement 1 only
B. Statement 2 only
C. Statement 1 and 2 only
D. Statement 2 and 3 only
E. Statement 1, 2 and 3
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