The percent-of-sales method of budgeting for promotion is arbitrary and does not recognize that promotion efforts and results are related.

Question

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The percent-of-sales method assumes that promotion expenses should be a fixed percentage of sales, regardless of the effectiveness of the promotions. This fails to recognize that there may be diminishing returns or that certain promotions may be more effective than others. Therefore, it is an arbitrary method that does not adequately account for the relationship between promotion efforts and results.

The Percent-Of-Sales Method of Budgeting for Promotion Is Arbitrary and Does