The Owner of an Independent Gift Store Is Developing an Advertising

question 138

Multiple Choice

The owner of an independent gift store is developing an advertising budget,and has totalled his company's revenues and deducted operating expenses and capital outlays.He intends to use a percentage of the remaining funds for advertising.Which budget setting method is he using?

• A)affordable method
• B)integrated method
• C)percentage-of-sales method
• D)competitive-parity method
• E)objective-and-task method

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Definitions:

Total Fixed Costs

Costs that do not vary with the level of output or sales in the short term, including expenses such as rent, salaries, and insurance.

Profit-seeking

The pursuit of activities that are expected to result in financial gain or increased profitability.

Profit-maximizing Output

The level of production at which a company can achieve the highest level of profit given its costs and the market price of its product.

Competitive Firm

A business that operates in a market where it has numerous competitors and cannot set prices but rather accepts market prices.