Budgeting Basics and Beyond

8.14. Variances to Evaluate Marketing Effort

Prior to setting a marketing standard in a given trade territory, examine prior, current, and forecasted conditions for the company itself and that given geographical area. Standards will vary, depending on geographical location. In formulating standard costs for the transportation function, minimum cost traffic routes should be selected on the basis of the given distribution pattern.

Standards for advertising cost in particular territories will vary depending on the types of advertising media needed, which are in turn based on the type of customers the advertising is intended to reach, as well as the nature of the competition.

Some direct selling costs can be standardized, such as product presentations for which a standard time per sales call can be established. Direct selling expenses should be related to distance traveled and frequency of calls made. If sales commissions are based on sales generated, standards can be based on a percentage of net sales.

Time and motion studies are usually a better way of establishing standards than prior performance, because the past may include inefficiencies.

Cost variances for the selling function may pertain to the territory, product, or personnel.

Variances in Selling Expenses

The control of selling expenses is not as significant for a company manufacturing a standard line of products with a limited number of established customers as for a manufacturer of custom products in a very competitive ...