When a Marketing Cost Analysis by Products Shows a Net

question 44

Multiple Choice

When a marketing cost analysis by products shows a net loss for one product,which of the following alternatives is management likely to adopt as a last resort?

• A)Raise the price,especially if the product has an inelastic demand.
• B)Drop the product from the line.
• C)Redesign or repackage the product.
• D)Simplify the assortment by eliminating some sizes or colors of this product.
• E)Reduce the price,especially if the product has an elastic demand.

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Definitions:

Direct Labor Hours

The total time workers spend working directly on manufacturing a product or providing a service, which is often used in allocating manufacturing overhead.

Normal Capacity

The maximum production level or volume of activity that can be achieved under normal conditions by a business.

Normal Spoilage Costs

Costs associated with the expected amount of waste or inefficiency during a production process, considered a normal part of manufacturing.

Direct Materials Price Standard

The predetermined cost per unit of material, used in setting a budget and controlling costs.