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beks73 [17]
3 years ago
13

When the "full-cost approach" to marketing cost analysis is used, allocating fixed costs on the basis of sales:A. may make low-v

olume customers appear more profitable than they are.
B. increases each customer's contribution margin.
C. decreases the profitability of the whole business.
D. makes large-volume customers appear more profitable that they are.
E. increases the profitability of the whole business.
Business
1 answer:
barxatty [35]3 years ago
6 0

Answer:A. May make low volume customers appear more profitable than they are.

Explanation:

The allocation of fixed cost based on sales volume will increase cost allocated to large volume sales unit which will invariably reduce their profit and will reduce the cost allocated to low volume sales which may increase their profit.

It does not affect the overall firm profitability not customers contribution margin.

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<u>Given:</u>

Annual property tax = $1,140

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<u>To find:</u>

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<u>Solution:</u>

The following is the calculation of the seller credit for property taxes,

\text{Seller credit for property taxes} = \text{Total tax}\times \frac{\text{Number of days}}{360}

On plugging-in the values we get,

\text{Seller credit for property taxes} = \$1,140\times\frac{91}{360}

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Answer:

A business can improve its average contribution ratio and its overall profitability, by shifting its sales mix to include more products with high contribution margin ratios.

In this case American steel company shift in product mix is due to a higher proportion of export sales. This shift caused to decline net income of the company. This is because the contribution margin ratio on export sales may lower than the other product mix. So, the shift of product mix to low contribution sales will cause to decline the net income.

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