A manager is using a full-cost approach,then allocating fixed costs on the basis of sales volume as a way of analyzing marketing costs.This method could:
A)Result in a decrease of profitability for the entire company
B)Create an environment that limits the total sales that can be made
C)Create an environment where high-volume customers appear more profitable than they actually are
D)Create an environment where low-volume customers appear more profitable than they actually are
E)Do all of the above

Question

Quizplus · Accepted Answer

Allocating fixed costs on a sales volume basis could create an environment where low-volume customers appear more profitable than they actually are because they would be allocated a smaller portion of fixed costs. This could lead to misinformed decision making regarding which customers to prioritize and which products to promote. It would not necessarily result in a decrease of profitability for the entire company, limit total sales, or make high-volume customers appear more profitable than they actually are.

A Manager Is Using a Full-Cost Approach,then Allocating Fixed Costs