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Hi John,
I trust you are well. Came across this question in my exam kit and was a tad confused so please could you explain it to me, as my Kaplan kit doesn’t really explain why.
Q21. C old produces game apps for smart phones. Marketing department want to gather data about customer preferences to better target customers and adverts and promotions. Suggestion is to complete in game survey as a way of earning credits to ‘buy’ items that would require payment.
Costs identified
I – Survey development costs
II- App credit system development
III- Loss off customers who are offends by surveys
IV- Lost sales due to customer earning credits rather than buying in game purchases
Which of these is consider indirect costs?
Answer is I and II as bottom two are ‘direct’ costs
Direct costs are those where the total varies with the number of units produced (or in this case the number of customers).
For I and II, the total cost will be the same regardless of how many customers complete the survey and so they are indirect costs.
For III and IV, the total cost will vary with the number of customers completing the survey, and so they are direct costs.
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