Activity based questions

93. Using cost analysis to analyze the money being spent by a firm is analogous to using ____________ to analyze the money coming into the firm.

sales analysis

traditional accounting reports

performance analysis

the iceberg principle

TQM methods

94. The text's "full-cost approach" to marketing cost analysis:

looks only at each customer or product's "contribution margin."

allocates all costs to products, customers, or other categories.

looks only at those costs which are directly related to particular alternatives.

is misleading and should be avoided.

All of the above.

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

considers only those costs which are directly related to particular alternatives.

is especially useful for estimating the long-run profit of a proposed strategy.

allocates variable costs which are hard to measure to overhead.

is especially useful for determining if there should be more controls on fixed costs.

All of the above.

96. The "contribution margin approach" to marketing cost analysis:

allocates all costs to products or customers.

should always be used instead of the full-cost approach--so that fixed costs are fully considered.

focuses management's attention on variable costs rather than total costs.

assumes that all costs must be allocated.

None of the above.

97. Regarding marketing cost analysis,

the full-cost approach usually should be used as there are almost always some fixed costs to be allocated.

the contribution-margin approach focuses attention on variable costs.

fixed costs should be allocated according to the contribution-margin approach.

the action implications will be the same whether the full-cost or contribution-margin approach is used.

the contribution-margin approach provides the most complete allocation of total expenses.

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

The contribution-margin approach uses both mechanical and logical reasoning to allocate marketing costs.

The full-cost approach allocates all costs--even fixed costs--to products, customers, or other categories.

The contribution-margin approach allocates all costs to show how profitable various customers are.

The full-cost approach focuses on variable costs rather than total costs.

99. With the "contribution-margin approach" to marketing cost analysis,

all costs are allocated to products, customers, or other categories.

fixed costs are allocated based on the profit contribution to the firm.

variable costs are treated as common costs.

common costs which are hard to allocate are ignored.

None of the above is true.

100. Lori Winters, a regional sales manager, is interested in the profitability of the different sales reps in her region. She has used a variety of different approaches for allocating fixed sales expenses to the different sales reps, but she reaches very different conclusions depending on which allocation approach is used. In this case, it would be wise for Ms. Winters to supplement her other analyses with an analysis based on

the contribution-margin approach.

the full-cost approach.

the marketing audit approach.

none of the above.

all of the above.

101. Regarding the "contribution-margin approach" to marketing cost analysis, which of the following statements is TRUE?

The total net profit obtained with this approach is different from that obtained using the "full-cost approach."

It is concerned with the amount contributed by a product or customer toward covering variable costs--after fixed costs have been covered.

This approach stresses the need for evaluating fixed costs.

This approach may suggest a different action than the "full-cost approach."

All of the above are true.

102. When the "full-cost approach" to marketing cost analysis is used, allocating fixed costs on the basis of sales:

may make low-volume customers appear more profitable than they are.

increases each customer's contribution margin.

decreases the profitability of the whole business.

makes large-volume customers appear more profitable that they are.

increases the profitability of the whole business.

103. If one were using the "full-cost" approach to marketing cost analysis, then allocating fixed costs on the basis of sales volume would:

make some customers appear more profitable than they actually are.

not be done--because only variable costs would be analyzed.

make some products appear less profitable than they actually are.

decrease the profitability of the whole business.

Both A and C are true statements.

104. Which of the following would be the BEST reason to use the "full-cost approach" when comparing the performance of several product managers?

Unlike the "contribution-margin approach," it charges managers only for the expenses which are directly related to their operations.

This approach is required by Federal tax laws.

It charges each product manager only for those expenses which he controls.

It allows management to consider only the variable costs related to different products.

It makes each manager bear a share of the overhead expenses which were made for everyone's benefit.

105. 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,

the contribution-margin approach would probably divide personal selling expense based on commission expense for each product line.

a full-cost approach would ignore commission expense since it is not a fixed cost.

sales commissions are a variable expense and would not be considered in the contribution-margin approach.

the full-cost approach would be easier to do if all sales reps were paid a straight salary.

None of the above is true.

106. When deciding how to evaluate costs, a marketing manager should realize that

the best method for dealing with fixed costs depends on the objectives of the analysis.

according to the iceberg principle too much detail in cost analysis obscures the big problems by calling attention to the superficial problems.

the full cost approach is misleading and should not be used.

the contribution-margin approach ignores necessary fixed costs and should not be used.

None of the above.

107. Which of the following statements about the contribution-margin approach is FALSE?

It is concerned with the amount contributed by an item or group of items toward covering fixed costs.

This approach suggests that it is not necessary to consider all costs in all situations.

Top management almost always finds this approach more useful than full-cost analysis.

This approach frequently leads to data which suggest a different decision than might be indicated by the full-cost approach.

It focuses on controllable costs--rather than on total costs.

108. A systematic, critical, and unbiased review and appraisal of the basic objectives and policies of the marketing function--and of the organization, methods, procedures, and people employed to implement the policies--is called a:

MIS report.

marketing audit.

management review.

marketing information system.

marketing analysis survey.

109. A marketing audit should help determine if:

current marketing strategies are good ones.

the company's marketing objectives are reasonable.

implementation of a marketing program was effective.

All of the above.

None of the above.

110. A marketing audit is:

an evaluation of day-to-day marketing operations.

an analysis of the profitability of all profit centers.

a review of a marketing program during a crisis.

a detailed look by a CPA at how the company's marketing costs are allocated.

a systematic, critical, and unbiased review and appraisal of the objectives and policies of the marketing function.

111. A "marketing audit" should:

be done by someone inside the finance department.

be conducted whenever a crisis arises.

be conducted by the person most familiar with each of the firm's marketing plans.

evaluate a company's whole marketing program on a regular basis.

All of the above.

112. Which of the following statements about a "marketing audit" is true?

A marketing audit should be conducted only when some crisis arises.

It probably should be conducted by someone inside the marketing department who is familiar with the whole program.

A marketing audit should evaluate the company's whole marketing program--not just some parts of it.

A marketing audit should be handled by the specialist most familiar with each of the marketing plans in the program.

All of the above are true statements.