Which of the Following Is NOT a Valid Criticism of the Commission

question 74

Multiple Choice

Which of the following is NOT a valid criticism of the commission compensation system for an ad agency?

• A) It is difficult to administer.
• B) In periods of media cost inflation, the agency is disproportionately rewarded.
• C) There is an incentive to avoid noncommissionable media.
• D) Media costs do not relate directly to effort or expertise expended by agencies.

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Definitions:

Variable Cost

Costs that vary directly with the level of production output, such as materials and labor, in contrast with fixed costs, which remain constant regardless of output.

Unit Product Costs

The total cost (including materials, labor, and overhead) to produce one unit of a product.

Predetermined Overhead Rate

An established rate used to assign overhead costs to products or job orders, calculated in advance based on anticipated costs and activities.

Special Order

An order typically outside the company's normal production that has unique requirements and pricing.