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In part (a),in the answer under the heading Website development,it mentioned that all website development costs are being written off as incurred so we would expect costs to be higher initial quarters.Can you help me understand that?
secondly,why expenses are made as percentage of sales?
The website development costs are mainly in the early quarters (as is clear from the results for the first two quarters) and are not costs that will be significant in later quarters. Had it not been for these costs, the loss in quarter 1 would have been much smaller and in quarter 2 there would have been a profit. Therefore the losses in the first two quarters and not an indicator of the likely future performance.
It is sensible to expect that expenses such as variable expenses and distribution costs will increase as sales increase. Therefore you would expect the expenses as a % of sales to be reasonably constant.
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