The Method of Budgeting by Percentage of Sales Reflects All

question 8

Multiple Choice

The method of budgeting by percentage of sales reflects all of the following except:

• A)Percentages used for different categories may be based on management's experience and/or feelings about what portion of sales dollars can be spent to achieve profit.
• B)Multiplying the sales forecast by exactly the same percentage for each category of expense.
• C)That in the event of declining sales forecasts,budget allocations for all expense categories also decrease.
• D)The tremendous impact on the effectiveness of this method by management's ability to accurately forecast sales budgets.
• E)Forecasting based on published industry averages for expense categories when they are adjusted to reflect the unique aspects of an organization.

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Definitions:

Organization

A structured arrangement of people working together to accomplish specific goals.

Geographically

Relating to the physical location or spatial characteristics of an area or place.

Hierarchically

In a manner that arranges things or concepts in levels of importance or rank.

Lines Of Reporting

The hierarchical structure within an organization that defines who reports to whom, outlining the flow of authority and accountability.