A Company Produces Three Product Lines and a Different Marketing

question 93

Multiple Choice

A company produces three product lines and a different marketing manager is responsible for each line. Most marketing expenses are specific to each line, but a common sales force sells all three lines. Sales reps are paid by commission, with a different commission for each product line. In this case, in a marketing cost analysis,

• A) the contribution-margin approach would probably divide personal selling expense based on commission expense for each product line.
• B) a full-cost approach would ignore commission expense since it is not a fixed cost.
• C) sales commissions are a variable expense and would not be considered in the contribution-margin approach.
• D) the full-cost approach would be easier to do if all sales reps were paid a straight salary.
• E) None of these is true.

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Definitions:

Prior Period Adjustments

Adjustments made to the financial statements to correct errors or account for omitted transactions from a previous period, not part of current period earnings.

Retained Earnings

The part of net profits not distributed as dividends, instead kept by the company for reinvestment in its main operations or for debt repayment.

Earnings Per Share

A financial metric that measures the amount of profit allocated to each outstanding share of a company's common stock.

Weighted-average

A calculation method that assigns different weights to data points, used to determine the average value of various items in a dataset that are not equally significant.