The percentage-of-sales technique of establishing an overall promotional budget is likely to provide too much funds in periods of high sales and too few funds in periods of low sales.

Question

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The percentage-of-sales technique is based on a fixed percentage of sales, so a company would allocate a larger budget for promotions when sales are high, and a smaller budget when sales are low. This approach may work well during periods of stable sales, but it can result in overspending during high sales periods and underspending during low sales periods. Therefore, this statement is accurate.

The Percentage-Of-Sales Technique of Establishing an Overall Promotional Budget Is