Which of the Following Observations About the Total Cost Approach

question 116

Multiple Choice

Which of the following observations about the total cost approach is NOT true?

• A) Includes transportation costs.
• B) Helps find the lowest total cost for the right service level.
• C) Focuses on direct costs and doesn't consider the possible costs of lost sales.
• D) Uses the tools of cost accounting and economics.
• E) Involves evaluating each possible physical distribution system and identifying all of the costs of each alternative.

---

Definitions:

Advertising Budget

The amount of money a business plans to spend on marketing and promotion activities.

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted, indicating how much contributes to covering fixed costs and generating profit.

Variable Expense Ratio

A financial metric that measures variable costs as a percentage of sales, reflecting how those costs fluctuate with production output.

Operating Leverage

A measure of how sensitive a company's operating income is to a change in sales volume, indicating the level of fixed costs in the business structure.