Which of the following is untrue of the percent-of-sales method?
A) It is much easier than tracing through various cash flows to arrive at the pro forma statements.
B) It is a broad-brush approach when compared to developing pro forma statements.
C) The output is less meaningful because it doesn't give the month-to-month breakdown of data when compared to pro forma statements.
D) Changes in sales levels is not an important aspect of this method.

Question

Quizplus · Accepted Answer

Changes in sales levels are a crucial aspect of the percent-of-sales method. The method uses a percentage of projected sales to estimate financial data, so any changes in sales levels will directly impact the estimated financial data. Therefore, choice D is untrue.

Which of the Following Is Untrue of the Percent-Of-Sales Method