Question

It is time to develop a budget for marketing department activities for the next year. Your team is looking over the following costs.:
1. Office rent
2. Sales commissions
3. Promotional budget
4. Product development costs
5. Office supplies
The finance department has recently told you that you have $3,000 to spend on office supplies. You cannot go beyond this no matter what changes happen in the marketing department. Your salespeople get a flat 15% sales commission on anything they sell. With this in mind, which of these costs are variable costs?

Answer 1

Answer: Sales commissions, promotional budget, and product development costs

Explanation:

Hi, the variable costs are Sales commissions, promotional budget, and product development costs, because they depend on the number of sales, or the production.  These costs will increase or decrease depending on the sales and production volume.

Office rent and office sales are invariable costs, it doesn’t matter the amount of sales or the production, they don't increase of decrease because of it.  They remain the same (fixed costs).

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