If one were using the "full-cost" approach to marketing cost analysis, then allocating fixed costs on the basis of sales volume would:
A) make some customers appear more profitable than they actually are.
B) not be done-because only variable costs would be analyzed.
C) make some products appear less profitable than they actually are.
D) decrease the profitability of the whole business.
E) Both make some customers appear more profitable than they actually are and make some products appear less profitable than they actually are are true statements.

Question

Quizplus · Accepted Answer

The "full-cost" approach to marketing cost analysis involves allocating both fixed and variable costs to products or customers. Allocating fixed costs based on sales volume can distort the perceived profitability of both customers and products. Some customers or products may appear more profitable because they contribute to a higher sales volume, which absorbs more fixed costs, while others may seem less profitable due to lower sales volume, even though the actual profitability when considering only variable costs might be different.

If One Were Using the "Full-Cost" Approach to Marketing Cost