Marginal Analysis Might Take the Form of Such Questions As,"Should

question 26

Multiple Choice

Marginal analysis might take the form of such questions as,"Should we extend our hours to include Sundays?" or "What if we put more apples in the pie?" The basic principle is that

• A)as long as a marketing action breaks even,the action is worth taking.
• B)expected incremental revenues from pricing and other marketing actions must more than offset incremental costs.
• C)you "don't rock the boat" if your program is making a profit;"leave well enough alone."
• D)if you are not willing to take risks,even if the numbers tell you otherwise,your business will ultimately fail.
• E)marketing and finance are two different animals: "If it feels right in your gut…go for it."

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Definitions:

Fixed Expenses

Costs that do not change with the level of production or sales within a certain range and for a specific period.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Cost Behaviour

Refers to how a cost changes as the related level of activity or volume changes.

Fixed Expenses

Costs that do not change in total despite changes in the volume of goods or services produced or sold, such as rent or salary expenses.