How will a percentage of sales models treat cost of goods sold if sales revenues are expected to grow by 20% to $1 million? Cost of goods sold will:

Question

Quizplus · Accepted Answer

In a percentage of sales model, cost of goods sold is directly linked and proportionate to sales. Therefore, if sales revenues are expected to grow by 20%, cost of goods sold will also increase by the same proportion, remaining proportionate to sales. Hence, option B is the correct answer. Options A, C, and D are incorrect as they do not follow the principles of a percentage of sales model.

How Will a Percentage of Sales Models Treat Cost of Goods