Which Statement Is Most Likely True About the Affordable Method

question 93

Multiple Choice

Which statement is most likely true about the affordable method of setting an advertising budget?

• A) Spending on advertising is calculated based on the financial objectives a company wishes to accomplish.
• B) Spending on advertising is calculated after operating expenses and capital outlays are deducted from total revenues.
• C) Spending on advertising is based on a predetermined percentage of current or forecasted sales for the year.
• D) Spending on advertising is calculated as a percentage of the unit sales price.
• E) Spending on advertising is based on a competitor's advertising outlays.

---

Definitions:

Net Operating Income

The income produced through a firm's principal commercial activities, not including the subtractions for interest and taxes.

Sales Volume

The total quantity of goods or services sold by a company in a specific period.

Least-Squares Regression

A statistical approach that finds the optimal fitting line by reducing the sum of the squares of the discrepancies between the actual and forecasted values.

Variable Cost

Costs that vary directly with the level of production or sales volume, such as materials and direct labor.