Question

1. How are general and administrative expenses classified (variable, fixed, mixed)? Why? 2. Why does the...

1. How are general and administrative expenses classified (variable, fixed, mixed)? Why?

2. Why does the company classify “advertising” as a fixed expense?

3. Why is marketing “allocated overhead expense” classified as fixed?

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Answer #1

1. How are general and administrative expenses classified (variable, fixed, mixed)? Why?

G & A are classified as fixed as they are in no way dependent on the volume of activity.

2. Why does the company classify “advertising” as a fixed expense?

Advertising is a discretionary expenditure and is not related to volume of activity.

3. Why is marketing “allocated overhead expense” classified as fixed?

It is not dependent on volume of activity and is a mere allocation of discretionary expense.

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