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    Percent-of-sales approach for firms with high fixed costs

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    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

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    https://brainmass.com/business/sales-revenue/percent-sales-approach-firms-high-fixed-costs-35272

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    Answer : underestimate profits when sales are increasing
    The percent-of-sales method may ...

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