The "Contribution-Margin Approach" to Marketing Cost Analysis

question 74

Multiple Choice

The "contribution-margin approach" to marketing cost analysis:

• A) considers only those costs which are directly related to particular alternatives.
• B) is especially useful for estimating the long-run profit of a proposed strategy.
• C) allocates variable costs which are hard to measure to overhead.
• D) is especially useful for determining if there should be more controls on fixed costs.
• E) All of these are correct.

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Definitions:

Machine Hours

A measure of production time, representing the hours a machine is operated in the manufacturing of a product.

Costing System

A method or procedure adopted by a business to estimate the cost of its products for inventory valuation, cost control, and decision making.

Overapplied Overhead

Occurs when the overhead allocated to products or services is more than the actual overhead costs incurred.

Profit Margin

The percentage of revenue that exceeds the cost of goods sold, indicating the profitability of a product or service.