The financial planning method that uses the projected sales level as the basis for determining changes in balance sheet and income statement account values is referred to as the ________ method.
A) percentage of sales
B) sales dilution
C) sales reconciliation
D) common-size
E) trend

Question

Quizplus · Accepted Answer

The percentage of sales method is a widely used financial planning method that involves calculating expenses and other account values as a percentage of sales revenue, thereby providing a way to estimate changes in these accounts as sales increase or decrease. This method is based on the idea that certain expenses, such as cost of goods sold and certain overhead expenses, are directly tied to sales volume and should therefore increase or decrease in proportion to changes in sales.

The Financial Planning Method That Uses the Projected Sales Level