When Using the Percentage-Of-Sales Approach for Determining the Advertising Appropriation

question 13

Multiple Choice

When using the percentage-of-sales approach for determining the advertising appropriation, marketers

• A) base their funding on a percentage of the competitors' sales.
• B) multiply the firm's past sales by a set percentage they want to spend.
• C) set sales objectives for the upcoming period and base appropriations on these goals.
• D) multiply the firm's past sales plus a factor for expected changes in sales times a standard percentage.
• E) use an industry standard to determine what percentage of their profits they want to allocate to advertising.

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Definitions:

Contribution Margin Ratios

The proportion of sales revenue that remains after variable costs are subtracted, indicating how well a company can cover fixed costs and generate profits.

Constrained Resource

A factor within a production or operation process that limits the overall output, such as limited machinery, labor, or materials.

Direct Labour-Hours

The total hours worked by employees directly involved in the manufacturing process, used as a basis for assigning labor costs to products.

Contribution Margin

The difference between sales revenue and variable costs, representing the portion of sales that contributes to covering fixed costs.