For firms with high fixed costs, the percent-of-sales approach for preparing a pro forma income statement tends to ________
overestimate profits when sales are increasing,
underestimate profits when sales are increasing,
be an accurate predictor of profits, or
neither understate nor overstate profits
Answer : underestimate profits when sales are increasing
The percent-of-sales method may ...
Answer to a multiple choice question on Percent-of-sales approach for firms with high fixed costs