Inspiring Toys, a small manufacturer of educational toys, is formulating a budget for next year's promotional activities. The company decides to budget $40,000 for promotional expenses (5 percent of the current year's $800,000 in sales). Inspiring Toys is using the ____ method of budgeting.

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The method of budgeting being used by Inspiring Toys is the percentage of sales method, which involves setting a budget for promotional expenses based on a percentage of the current year's sales. In this case, the company has decided to allocate 5% of its $800,000 in sales for promotional expenses, resulting in a budget of $40,000. This is a common method of budgeting for small businesses, as it provides a clear guideline for setting promotional budgets that are in proportion to overall sales volume.

Inspiring Toys, a Small Manufacturer of Educational Toys, Is Formulating