It is time to develop a budget for marketing department activities for the next year. Your team is looking over the following costs.
a. Office rent
b. Sales commissions
c. Promotional budget
d. Product development costs
e. 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?
A) Office rent, sales commissions, promotional budget, product development costs, office supplies
B) Office rent, promotional budget, and office supplies
C) Sales commissions, promotional budget, and product development costs
D) Sales commissions, product development costs, office supplies
E) Promotional budget and office supplies

Question

It is time to develop a budget for marketing department activities for the next year. Your team is looking over the following costs. 
a. Office rent
b. Sales commissions
c. Promotional budget
d. Product development costs
e. 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? 
A) 	Office rent, sales commissions, promotional budget, product development costs, office supplies
B) 	Office rent, promotional budget, and office supplies
C)	Sales commissions, promotional budget, and product development costs
D)	Sales commissions, product development costs, office supplies
E)	Promotional budget and office supplies

Quizplus · Accepted Answer

Variable costs are costs that change according to the level of activity or production. In this case, only the sales commissions, promotional budget, and product development costs are variable costs because they are dependent on the level of sales or production. Office rent and office supplies are fixed costs because they do not change regardless of sales or production levels. Therefore, the best choice is C.

It Is Time to Develop a Budget for Marketing Department