Imagine You Have Overheard the Owner of a Medium-Sized Manufacturing

question 218

Multiple Choice

Imagine you have overheard the owner of a medium-sized manufacturing company saying, "We had a good year, and I think next year will be even better. I'm going to raise this year's promotion budget to 4.5 percent of last year's gross dollar sales. That will let me do more advertising than the 3.5 percent I budgeted last year." From this information, the manufacturer is using __________ budgeting.

• A)percentage of sales
• B)competitive parity
• C)all-you-can-afford
• D)objective and task
• E)linear forecast

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Definitions:

Operating Cycle

The average time period between purchasing or acquiring inventory and receiving cash from sales of the inventory.

Existing Current Assets

Current assets that have been on a company's balance sheet for an extended period and include cash, accounts receivable, inventory, and other short-term assets.

Voluntary Deductions

Optional deductions from an employee's paycheck, such as for health insurance or retirement savings plans.

FICA Taxes

Taxes imposed on both employees and employers to fund Social Security and Medicare, based on a percentage of the employees' wages.