Reference no: EM133113936

(a) There are five commonly used methods for the determination of promotional budget.  One of them is referred to as the "percentage-of-sales" method.  Under this method, at times, weighted average sales for past years are used as reference for calculating the following year's budget.  Calculate the promotional budget for the year 2021 with the following sales scenario:

* Sales

Yr2020          $14 million

Yr2019          $16 million

Yr2018          $10 million

Yr2017          $7 million

Yr2016          $12 million

* with assigned weight at 5% a simple reduction-of-relevance per year; and;

* with 2% of weighted sales as budget

Calculation steps are required to be shown clearly in your answer without which a zero mark will still be awarded even if the correct answer is presented. Consider yourself cautioned.

(b) Using the same data above, should you find Yr2017's sales figure not to be reflecting that of a "normal" year and wish not to have it included as part of the calculation, make all adjustments necessary and re-calculate the budget using the remaining four years' data.

Again, calculation steps are required to be shown clearly in your answer without which a zero mark will still be awarded even if the correct answer is presented. Consider yourself cautioned.

(c) Excluding ANY of the "percentage-of-sales" methods, there are four other methods, namely,

(i) Objective-and-task method;

(ii) Competitive parity method;

(iii) Affordable budgeting method; and;

(iv) Fixed-sum-per-unit method

that are also employed in the calculating of promotional budgets.  What types of company and/or individual do you think would likely use each of the above listed four methods and the reason why?

(d) Out of all five methods, what might be your choice and why?