When using the competitive parity method to budgeting, the firm:
A)matches its percentage-of-sales expenditures with those of others in the market/industry.
B)spends as much as it can.
C)allocates some portion of planned sales for the period to advertising.
D)spends the same total amount as its major competitors spend.
E)bases its advertising and promotion expenditures on sales.

Question

Quizplus · Accepted Answer

The competitive parity method involves matching the percentage-of-sales expenditures with those of others in the market/industry. This means that the firm spends the same percentage of its sales revenue on advertising and promotion as its competitors do. This approach helps the firm stay competitive within the industry without overspending on marketing efforts.

When Using the Competitive Parity Method to Budgeting, the Firm