Question

Higado Confectionery Corporation has a number of store locations throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost with respect to the stores?

(A) store manager salaries
(B) store building depreciation expense
(C) the cost of corporate advertising aired during the Super Bowl
(D) cost of goods sold at each store
(E) none of the above

Answer 1

Answer:

(C) the cost of corporate advertising aired during the Super Bowl.

Explanation:

Fixed costs are the amount a business spends in the process of producing, promoting and distribution big it's products. In this scenario all the stores of Higado Confectionery Corporation will benefit from advertisements during the Super Bowl, so it will be a shared cost.

Also there will be a fixed amount that will be spent yearly on this, so it is a fixed cost for the stores, and will be reflected in the income statement as such.