Explain how you would analyze and classify the marketing costs. What purposes are served by such analysts and classification?

Management Accounting Block Revision Mock Exams

How to analyse marketing cost:

Marketing costs are the costs incurred to increase or maintain the sales level in the market.
They are also incurred to gain the knowledge of what consumer‟s need, and their response to the organizations products. The total marketing costs = fixed marketing costs
+ variable marketing costs.

Fixed Marketing Costs: they do not increase with increase in the sales level e.g. fixed salaries of sales persons.

Variable Marketing Costs: they increase proportionately with the increase in sales e.g. salespersons sales commissions, the sales manager commissioning delivery costs.

The analysis would server the following purposes:

Enable us to understand the cost behaviour of marketing costs for cost control purposes. E.g. which costs are fixed and therefore beyond a manager‟s control and which costs are variable and therefore within a manager‟s control.

Enable us to undertake an objective performance evaluation. Useful in planning the marketing costs.

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