The Main Difference Between the Full-Cost Approach and the Contribution-Margin

question 105

Multiple Choice

The main difference between the full-cost approach and the contribution-margin approach to marketing cost analysis is:

• A) The contribution-margin approach uses both mechanical and logical reasoning to allocate marketing costs.
• B) The full-cost approach allocates all costs-even fixed costs-to products, customers, or other categories.
• C) The contribution-margin approach allocates all costs to show how profitable various customers are.
• D) The full-cost approach focuses on variable costs rather than total costs.

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Definitions:

Substitute Products

Products that serve as alternatives to one another in the market, satisfying similar needs or wants of consumers.

Immediate Rivals

Competitors that directly impact a business’s operations or market position, often operating in the same industry and targeting similar customer bases.

Value-Chain Analysis

A strategic analytical tool used for identifying the primary and support activities of a business that add value to its final product and then analyzing these activities to reduce costs or increase differentiation.

Location Decisions

The process of selecting a place for conducting business, considering factors like cost, access to suppliers, distribution channels, and customer interaction.