Answer:
Mood-lites are colored lightbulbs that were developed according to research on how colors affect moods. In allocating funds for advertising the new lightbulbs, the manufacturer decided to budget a certain proportion of last year sales for advertising expenditures. The allocation method the manufacturer was using is:
A. Percentage-of-sales method
Explanation:
The percentage of sales method, is very simple, conservative and the most popular, by taking a percentage of previous overall sales budget and applying it to advertising, making it the safest for a small business to use.
Options B, C, D and E are no correct as:
B. Self-defense method or Competitive Parity Method
, is comparing its own business advertising spending versus its competitors as a starting point.
C. Objective and Task Method
, used by most large businesses, allows the advertiser to correlate advertising expenditures with overall marketing objectives, keeping expenses focused on the selling proposals, positioning statements, determining the cost to reach them, including fiscal realities, therefore this method is beyond the small business scope.
D. Share-of-market/share-of-voice method budgeting strategy is based on external market trends, making its market share equal to its advertising expenses.
E. Budget buildup method or Unit Sales Method
, takes the cost of advertising an individual item and multiplies it by the number of units the business wishes to sell.
