A beverage company is planning its promotional budget for the next fiscal year. For a new product, the company allocates 5% of projected sales, while for an existing product it allocates 2% of projected sales. If projected sales are Rs. 10 crore for the new product and Rs. 25 crore for the existing product, calculate the total promotional budget required.
Answer
Total promotional budget = Rs. 1.00 crore
The correct answer is Total promotional budget = Rs. 1.00 crore — Add the two amounts to obtain the total promotional budget: 0.5 + 0.5 = Rs. 1.0 crore.
Step-by-step solution
- Calculate promotional budget for the new product: 5% of Rs. 10 crore = 0.05 × 10 = Rs. 0.5 crore.
- Calculate promotional budget for the existing product: 2% of Rs. 25 crore = 0.02 × 25 = Rs. 0.5 crore.
- Add the two amounts to obtain the total promotional budget: 0.5 + 0.5 = Rs. 1.0 crore.
Common mistake: Applying the wrong percentage to a product type or forgetting to sum the two budgets.
Concept tested: Promotional budgeting using sales‑percentage method
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