Advertising costs have a consistent relationship to the firm's sales volume in the _____ method of setting an advertising budget.
A) units of sales
B) percentage of sales or profits
C) objective
D) executive decision

Question

Quizplus · Accepted Answer

In the percentage of sales or profits method, advertising costs are set as a percentage of the firm's sales or profits. This method ensures that advertising costs have a consistent relationship to the firm's sales volume. As sales increase, advertising expenditures also increase proportionally, and vice versa. This method is widely used as it helps maintain the stability of the advertising budget and ensures that the firm does not overspend on advertising.

Advertising Costs Have a Consistent Relationship to the Firm's Sales