Purchase Solution

Percentage of Sales Model

Not what you're looking for?

Ask Custom Question

Percentage of sales models usually assume that costs, fixed assets, and working capital all increase at the same rate as sales. When do you think that these assumptions do not make sense Would you feel happier using a percentage of sales model for short-term or long term planning?

Purchase this Solution

Solution Summary

The solution explains the use of Percentage of Sales Model in short or long term planning

Solution Preview

The assumptions relating to fixed assets and costs would not make sense any time. The reason is

Costs - Some costs are fixed and some are variable. The fixed costs would not change with change in sales while the variable costs will increase. Thus the percentage of sales method would overstate the costs since it assumes that all costs will increase, while the fixed costs would not increase.

Fixed Assets - Fixed assets are lumpy and so would not ...

Purchase this Solution


Free BrainMass Quizzes
Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Motivation

This tests some key elements of major motivation theories.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)