A firm is doing a marketing cost analysis involving two products, three target markets, and $6 million in advertising costs. The firm should:
A) allocate $2 million of the advertising costs to each target market.
B) allocate these costs to general overhead.
C) determine the purpose of the advertising and allocate costs to products and target markets accordingly.
D) allocate these costs to each product and target market on the basis of their percentage of total sales.
E) allocate $3 million of the advertising costs to each product.

Question

Quizplus · Accepted Answer

The firm should determine the purpose of the advertising and allocate costs to products and target markets accordingly. This is because different products may have different advertising needs and different target markets may require different marketing approaches, hence the allocation of costs should be based on the purpose of the advertising. Allocating costs equally to all target markets or products may not be an effective use of resources. Additionally, allocating costs to general overhead may not accurately reflect the impact of the advertising on specific products and target markets.

A Firm Is Doing a Marketing Cost Analysis Involving Two