The percentage-of-sales budget is based on the availability of funds rather than on opportunities.

Question

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The percentage-of-sales budget is based on a company's sales revenue, not on the opportunities for investment. It is a profitability-oriented budgeting method that allocates a fixed percentage of the expected sales revenue to various expenses, such as advertising and promotions, based on historical trends or industry benchmarks. Therefore, it is driven by the availability of funds, i.e., the amount of sales generated, rather than on the potential investment returns or growth prospects.

The Percentage-Of-Sales Budget Is Based on the Availability of Funds