Consumer Focus is a marketing research firm that organizes focus groups for consumerproduct companies. A Consumer Focus Staff member attends each session to ensure that all the logistical aspects run smoothly” In light to the above statement, classify each of the following cost items as: a. Direct or Indirect (D or I) costs with respect to each individual focus group. b. Variable or Fixed (V or F) costs with respect to how the total costs of Consumer Focus change as the number of focus groups conducted changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the number of groups conducted.) You will have two answers (D or I; V or F) for each of the following items followed by a short interpretation note. Use the sample answer table and continue from Cost Item B Cost Item A. Payment to individual in each focus group to provide comments on new products. B. Annual subscription of Consumer Focus to Consumer Reports magazine. C. Phone calls made by Consumer Focus staff member to confirm individuals will attend a group session (record of individual calls are not kept). D. Retainer paid to focus group leader to conduct 20 focus groups per year on new medical products. E. Meals provided to participants in each focus group. F. Lease payment by Consumer Focus for corporate office. G. Cost of tapes used to record comments made by individuals in a focus group session. (These tapes are sent to the company whose products are being tested.) H. Petrol/diesel costs of Consumer focus staff for company-owned vehicles (staff members submit monthly bill with no mileage breakdowns).
Consumer Focus is a
logistical aspects run smoothly”
In light to the above statement, classify each of the following cost items as:
a. Direct or Indirect (D or I) costs with respect to each individual focus group.
b. Variable or Fixed (V or F) costs with respect to how the total costs of Consumer Focus change
as the number of focus groups conducted changes. (If in doubt, select on the basis of whether the
total costs will change substantially if there is a large change in the number of groups
conducted.)
You will have two answers (D or I; V or F) for each of the following items followed by a short
interpretation note. Use the sample answer table and continue from Cost Item B
Cost Item
A. Payment to individual in each focus group to provide comments on new products.
B. Annual subscription of Consumer Focus to Consumer Reports magazine.
C. Phone calls made by Consumer Focus staff member to confirm individuals will attend a group
session (record of individual calls are not kept).
D. Retainer paid to focus group leader to conduct 20 focus groups per year on new medical
products.
E. Meals provided to participants in each focus group.
F. Lease payment by Consumer Focus for corporate office.
G. Cost of tapes used to record comments made by individuals in a focus group session. (These
tapes are sent to the company whose products are being tested.)
H. Petrol/diesel costs of Consumer focus staff for company-owned vehicles (staff members
submit monthly bill with no mileage breakdowns).
Sample Answer
Cost Items D or I V or F Interpretation
A. D V Chargeable Expenses as the payment made to direct
Direct costs are the costs which are related to a product or service. Indirect costs are not directly related to a product or service.
Variable costs are the costs which change with a change in the number of goods produced or activity. fixed costs generally remain constant. it does not change with a change in the activity or number of goods.
The classification of the cost and their interpretation is as follows:
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