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Discuss the percentage of sales method used for setting the total budget for advertising. What is...

  1. Discuss the percentage of sales method used for setting the total budget for advertising. What is the timing issue with this method?
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Answer #1

The percentage of sales is nothing but the forecast of the growth in single cell compared to the series of the current year. This method is used to tell you that how much financing or advertising budget you need to allocate to increase to that amount and this can be done by issuing direct relationship between the advertising budget and the forecasted sales. However there are certain limitations to this method as it is not exactly appropriate and only gives you a rough estimation. the timing issue that is used in the percentage of sales method is also a limitations of this where the assumptions that are taken in the past sales are used even future which might not be true.

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