Understanding Coca-Cola's Marketing Expenditures and Cost

School: University of Notre Dame - Course: ACC 2201 - Subject: Accounting

Week 4 Assignment Teddy Hart ACC 226 Managerial Accounting October 28, 2021

In your opinion, are Coca-Cola's marketing expenditures a fixed cost, variable cost, or mixed cost? Give justification for your answer. Marketing expenditures of Coca-Cola comprise of print, radio, television, and other forms of advertisements. In my opinion, marketing expenditures for Coca Cola is some sort of a mixed cost.In the annual filing of the company, it is stated that some marketing expenditures are included in the selling and general expenses. Oftentimes marketing expenditures do not fluctuate with volume so it can be considered a fixed cost. However, there are subsets marketing expenditures that are not associated with the product but are considered variable. Are sweeteners and packaging a variable cost or fixed cost? What is the impact on the contribution margin of an increase in the per unit cost of sweeteners or packaging? What are the implications for profitability? Sweeteners and packaging are considered variables costs because these are materials used as components to produce a product.Sweeteners are direct materials that directly go into a product. Packaging costs on the other hand are associated with the product. Both costs increase as the level of volume increase and decrease as the level of volume decrease. The contribution margin computed as sales less variables costs remains the same even if the volume increases or decreases. It will stay the same unless there are changes in the costs of variable costs associated with the product or changes in the selling price. The contribution margin is just another way of looking at the profit because this amount shows how sales exceed the variable costs.