Concerning the method of budget setting known as objective-and-task, which statement is most likely accurate?

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First, let's restate the question and all answer options to anchor the discussion. Question: Concerning the method of budget setting known as objective-and-task, which statement is most likely accurate?

Answer options:
1) It entails aligning the promotion budget with competitors' expenditures.
2) It stands as the least rational method for establishing budgets.
3) It inaccurately perceives sales as the instigator of promotion rather than its consequence.
4) It necessitates management to articulate its assumptions regarding the correlation between expenditure and promotional outcomes
5) It represents the most straightforward and time-efficient approach

Now, evaluate each option one by one, explaining why it is or isn’t plausible within the context of objective-and-task budgeting.

Option 1: It entails aligning the promotion budget with competitors' expenditures. This option suggests a benchmarking approach that ties budget size to what competitors spend. However, objective-and-task budgeting does not rely on what others spend; instead, it starts from defining objectives, determining tasks needed to achieve those objectives, and estimating the costs of those tasks. Therefore, this statement mischaracterizes the method by emphasizing external benchmarking rather than internal planning of objectives and tasks. It is an incorrect depiction of the core process.

Option 2: It stands as the least rational method for establishing budgets. This claim asserts that objective-and-task budgeting is irrational. In practice, objective-and-task is widely regarded as a rational, rigorous approach because it ties resources directly to specific objectives and the tasks required to achieve them. Unless one has a strong preference for other methods (like baseline or ad hoc budgeting), labeling objective-and-task as the least rational is not supported by standard cost-management theory. This option misstates the method’s rationality and is therefore incorrect.

Option 3: It inaccurately perceives sales as the instigator of promotion rather than its consequence. This statement would criticize a viewpoint where sales drive promotional spending rather than promotions driving sales. Objective-and-task budgeting, however, begins with objectives (which could include sales targets or market share goals) and then determines the tasks and costs to achieve those objectives. Saying it treats sales as the promoter of promotion itself misinterprets the sequencing and purpose of the method. While related concepts about causality can be nuanced, this option does not accurately describe the method’s fundamental logic and is therefore incorrect.

Option 4: It necessitates management to articulate its assumptions regarding the correlation between expenditure and promotional outcomes. This option directly captures the essence of objective-and-task budgeting: managers define what they expect the relationship is between the funds spent and the resulting promotional outcomes, estimate the costs of the required tasks to achieve the objectives, and justify the budget based on those assumptions. It emphasizes explicit assumptions about how much impact spending will have, which aligns with the methodological core of objective-and-task budgeting. This is a correct and central characteristic of the method.

Option 5: It represents the most straightforward and time-efficient approach. In reality, objective-and-task budgeting is often time-consuming and demanding, requiring careful analysis of objectives, tasks, and their costs, plus justification of the causal links between spending and results. Therefore, describing it as the most straightforward and time-efficient approach is inaccurate, making this option incorrect.

In summary, the options that mischaracterize or dispute the fundamental process (Options 1, 2, 3, and 5) contain inaccuracies about how objective-and-task budgeting operates. The option that correctly reflects the method’s core requirement is Option 4, which emphasizes articulating assumptions about the relationship between expenditure and promotional outcomes. The reasoning here highlights why this approach is foundational to objective-and-task budgeting and why the other statements fail to accurately describe the method.

MKTG1199 LF04 In-class Test 4

Concerning the method of budget setting known as objective-and-task, which statement is most likely accurate?

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