What is the percentage of sales method in forecasting? Explain the weaknesses of using this method.
Percentage of Sales Method of Forecasting
The Percentage of Sales Method of forecasting is based on the idea that most Balance Sheet and Income Statement Accounts vary with variations in the sales level. Significant accounts used in this calculation are converted to a percentage of sales. That percentage is then used to multiply the forecasted sales volume for the next time period for each account ...
Theoretical Solution: The concept of forecasting using the percentage of sales method is explained and its weaknesses are discussed.