One of the problems with the percentage of sales budgeting method is:
A)deciding on the percentage level.
B)finding a benchmark figure to use.
C)the budget tends to change in the opposite direction of what may be needed.
D)the competition knows how much the company will spend on advertising.

Question

Quizplus · Accepted Answer

The percentage of sales budgeting method can lead to a situation where, if sales are declining, the advertising budget will also decrease, which may be the opposite of what is needed to boost sales. Conversely, if sales are increasing, the advertising budget increases, potentially allocating more funds to advertising than might be necessary. This method ties the advertising budget directly to sales revenue, which can lead to counterproductive budget adjustments in response to sales fluctuations.

One of the Problems with the Percentage of Sales Budgeting