What Is the Main Limitation of Using the Single-Factor Analysis

question 22

Multiple Choice

What is the main limitation of using the single-factor analysis method for classifying accounts?

• A) The importance of small customers tends to be overrepresented in single-factor analysis.
• B) The single-factor method for classifying accounts does not take into account any variation in sales effort expended by the previous salesperson.
• C) Accounts with high sales potential tend to be overemphasized by the single-factor analysis method.
• D) A single factor such as sales potential is often inadequate to properly allocate selling effort between accounts.

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Definitions:

Investment Center

A decentralized unit in which the manager has the responsibility and authority to make decisions that affect not only costs and revenues but also the fixed assets available to the center.

Authority

The power or right to make decisions, direct others, and enforce obedience within a particular scope.

Plant Assets

Fixed assets that are tangible in nature, such as buildings and machinery, used in the operations of a business and expected to be useful for many years.

Profit Margin

A measure of a company's profitability, typically defined as net income divided by revenue, and expressed as a percentage.