The major problem with the _____ budgeting method is a reversal of the cause and effect relationship.
A) percentage of sales
B) objective and task method
C) competitive parity
D) rapidly diminishing returns

Question

Quizplus · Accepted Answer

The percentage of sales budgeting method assumes that the budget for advertising or marketing expenses will be a percentage of the sales revenue. However, this method has a major flaw in that it reverses the cause and effect relationship. Instead of determining the budget based on the desired outcomes, such as increasing sales or market share, the budget is based on the actual sales revenue, which can lead to suboptimal spending decisions.

The Major Problem with the _____ Budgeting Method Is a Reversal