Methods to determine Promotional Budget
What are the methods to determine Promotional Budget? Explain in brief.
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Methods to Determine Promotional Budget:
• Affordable Budget: setting the promotional budget at the level the management can afford. Often used by small businesses, the starting point is after allocation of capital outlays and operating expenses from the revenue the remaining is allocated for advertisement. However the method completely ignores the effect of promotion on sales and may lead to over or under promotional spending.
• Percentage of Sales Method: is setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of sales price. Simple to calculate, it helps the management to link relationships between promotion spending, selling price and profit per unit. However it wrongly views sales as the cause of promotion rather than the result. Yearly budget variations causes problem with this method as the method does not provide basis selecting the percentage use.
• Competitive-Parity Method: is setting the promotional budget as per the competitor’s outlay. This method helps in preventing the promotional wars as each firm tries to have equal share of the market. But this justification has not been helpful for explaining the competitor’s spending.
• Objective and Task Method: involves developing the promotion budget by defining the promotional objectives, determining the tasks that would help in achieving these objectives, estimating the costs of performing these tasks. The sum of the above costs is the proposed promotion budget. However it is a difficult method to use.
Describe how the cash budget and the capital budget associate to proforma financial statements.The cash budget illustrates the projected flow of cash in and out of the firm for particular time periods. The capital budget illustrates planned expe
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Revenue: Any adding up to cash or other current assets which does not raise any liability or reserve and does not symbolize the reduction or recovery of expenditure (example, reimbursements or abatements). Revenues are a kind of receipt usually derive
Appropriation Schedule: The detail of an appropriation (example, in the Budget Act), exhibiting the distribution of the appropriation to each of the class, programs, or projects thereof.
Financial Controls: Any measure of how fine a company or department controls its costs, at times stated as how far beneath or over budget it is. Financial controls are a critical portion of any financial system. They make sure that the resources are b
Department: The governmental organization, generally belonging to the third level of the state organizational hierarchy as stated in the Uniform Codes Manual.
Allotment: The permitted division of an amount (generally of an appropriation) to be expended for a specific purpose throughout a particular time period. An allotment is usually authorized on line item expenditure basis by program or
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