Question

Underarmour forecasts sales of $5 Billion in 2017. They are trying to decide how much to allocate to advertising and their agency has told them that their competitors in the athletic apparel/accessories segment spend on average 3.2% of sales on advertising. They spent $140 million on advertising in 2016. Using the A/S ratio method, calculate a budget for Underarmour for 2017:

	a.	$16,000,000
	b.	$140,000,000
	c.	$150,000,000
	d.	$160,000,000
	e.	None of these

Answer 1

Sales (S) = 5 Billion in 2017

A/S = 3.2% (the competition is th benchmark)

So, Advertisement budget in 2017 (A) = S * 3.2% = 5 Billion * 3.2% = 0.16 billion i.e. $160,000,000