When Using the Competitive Parity Method to Budgeting, the Firm

question 90

Multiple Choice

When using the competitive parity method to budgeting, the firm:

• A)matches its percentage-of-sales expenditures with those of others in the market/industry.
• B)spends as much as it can.
• C)allocates some portion of planned sales for the period to advertising.
• D)spends the same total amount as its major competitors spend.
• E)bases its advertising and promotion expenditures on sales.

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Definitions:

Commercial Substance

A concept in accounting that refers to a transaction significantly altering the cash flows of an entity, necessitating its recognition in financial statements.

Double-Declining-Balance Method

A method of accelerated depreciation where an asset's book value is reduced at double the rate of straight-line depreciation.

Useful Life

The estimated duration of time a fixed asset is expected to be economically usable by an entity.

Straight-Line Method

This is a depreciation method where an equal amount of the asset's cost is allocated as an expense each year over its useful life.