Which of the following statements about the percentage-of-sales method of budgeting is true?

Question

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The percentage-of-sales method assumes that sales cause promotional outlays, meaning that as sales increase, the amount spent on promotions increases proportionally. This method is a type of top-down budgeting, where the promotional budget is determined based on a percentage of the forecasted sales. Option A is incorrect because the percentage-of-sales method is one of the more commonly used bottom-up methods. Option C is incorrect as there are other top-down methods used for budgeting. Option D is also incorrect as the method assumes that production is a result of sales, not the other way around. Option E is not true as this method implies that promotional budgets decrease as sales decrease.

Which of the Following Statements About the Percentage-Of-Sales Method of Budgeting