Reference no: EM132821584

In a recent annual report, a major soft drink manufacturer and distributor announced that their gross profit margin was down 1%. (One percent may not sound like much, but 1% of $37 billion is a $370 million decrease in gross profit.). The company justified the loss because of an increase in direct materials and and increase in selling expenses. The increases in selling expenses were due to higher marketing costs used to grow the business.

Answer the following questions:

1. In your opinion, are the marketing expenses in total a fixed cost, a variable cost, or a mixed cost?

2. Justify your answer to #1. Why did you characterize them as fixed, variable, or mixed?

3. Use some examples to justify your answer. See below for some cost options.

4. Respond to a fellow classmate either agreeing or disagreeing to a classmate and why.

Hint: Marketing expenses typically include distribution costs such as shipping expenses, advertising costs including web maintenance and social media, and selling costs such as salesperson travel costs and commissions.