Which of the Following Is a Disadvantage of Using a Percentage-Of-Sales

question 28

Multiple Choice

Which of the following is a disadvantage of using a percentage-of-sales method to determine the marketing communications budget?

• A) It discourages stability when competing firms spend approximately the same percentage of their sales on communications.
• B) By using a percentage-of-sales method, communication expenditures tend to be extremely high irrespective of what a company can afford.
• C) It discourages management from thinking of the relationship among communication cost, selling price, and profit per unit.
• D) Dependence of the percentage-of-sales method on year-to-year sales fluctuations interferes with long-range planning.
• E) The percentage-of-sales method views sales as the result in itself rather than the determiner of communications.

Understand the implications of cash flow patterns on project evaluation.

Learn how to incorporate inflation and taxation considerations into investment decision analysis.

Understand the distinction between nominal and real rates of return and their impact on investment appraisals.

Understand the concept of fixed and variable costs and their implications on production decision-making.

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