The Method of Budgeting by Percentage of Sales Reflects All

Multiple Choice

The method of budgeting by percentage of sales reflects all of the following except:

A) Percentages used for different categories may be based on management's experience and/or feelings about what portion of sales dollars can be spent to achieve profit.
B) Multiplying the sales forecast by exactly the same percentage for each category of expense.
C) That in the event of declining sales forecasts,budget allocations for all expense categories also decrease.
D) The tremendous impact on the effectiveness of this method by management's ability to accurately forecast sales budgets.
E) Forecasting based on published industry averages for expense categories when they are adjusted to reflect the unique aspects of an organization.