Question: A company wants to determine its marketing costs for budgeting purposes. Activity measures and costs incurred for four months of the current year are presented in the table below. Advertising is considered to be a discretionary cost. Salespersons are paid monthly salaries plus commissions. The sales force was increased from 20 to 21 individuals during the month of May.
| Activity measures |
March |
April |
May |
June |
| Sales orders |
2,000 |
1,800 |
2,400 |
2,300 |
| Units sold |
55,000 |
60,000 |
70,000 |
65,000 |
| Dollar sales |
$1,150,000 |
$1,200,000 |
$1,330,000 |
$1,275,000 |
| Marketing costs |
|
|
|
|
| Advertising |
$ 190,000 |
$ 200,000 |
$ 190,000 |
$ 190,000 |
| Sales salaries |
20,000 |
20,000 |
21,000 |
21,000 |
| Commissions |
23,000 |
24,000 |
26,600 |
25,500 |
| Shipping costs |
93,000 |
100,000 |
114,000 |
107,000 |
| Total costs |
$ 326,000 |
$ 344,000 |
$ 351,600 |
$ 343,500 |
In relation to the dollar amount of sales, which of the following cost classifications is appropriate for advertising and sales salaries costs? Advertising Sales Salaries
A. Variable cost Fixed cost
B. Fixed cost Variable cost
C. Mixed cost Mixed cost
D. Fixed cost Fixed cost