A problem with the percentage of sales method is that some variables are relatively insensitive to sales. The percentage of sales method will therefore, in a growing company, overstate such values.

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The statement is true. Since the percentage of sales method assumes that all expenses or variables are proportional to sales, it may overstate the value of items that are less affected by sales. In a growing company, these non-variable costs may remain largely constant or increase at a slower rate than sales, leading to an overestimation of their importance in relation to sales.

A Problem with the Percentage of Sales Method Is That