Fixed assets are often estimated incorrectly by the percent of sales method because

Question

Quizplus · Accepted Answer

The percent of sales method assumes that all assets increase proportionally with sales, which is not necessarily the case for fixed assets. Fixed assets are typically purchased in "lumps," meaning they may not increase proportionally with sales. Therefore, estimating fixed assets using the percent of sales method can lead to inaccurate estimations.

Fixed Assets Are Often Estimated Incorrectly by the Percent of Sales