Utilizing Past Cost and Expense Ratios (Percent-Of-Sales Method) When Preparing

question 40

Multiple Choice

Utilizing past cost and expense ratios (percent-of-sales method) when preparing pro forma financial statements will tend to ________.

• A) understate profits when sales are decreasing and overstate profits when sales are increasing
• B) understate profits, no matter what the change in sales, as long as fixed costs are present
• C) understate profits when sales are increasing and overstate profits when sales are decreasing
• D) overstate profits, no matter what the change in sales, as long as fixed costs are present

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Definitions:

CS

In learning psychology, CS stands for Conditioned Stimulus, an initially neutral stimulus that, after being associated with an unconditioned stimulus, eventually triggers a conditioned response.

Conscious Intentions

Mental states or plans that are formed with awareness and purpose towards carrying out an action.

John B. Watson

An American psychologist who established the psychological school of behaviorism.

Behaviorists

Psychologists who focus on observable behaviors and the ways in which learning mechanisms affect behavior.