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Answer: Selling and distribution expenses can be effectively modeled as a proportion of sales.
**Explanation:** - **Option A** is incorrect because general corporate costs are typically fixed rather than variable and are better forecasted using a fixed growth rate, such as expected wage inflation. - **Option B** is correct. Selling and distribution expenses often include a significant variable component, making them suitable for modeling as a percentage of sales. - **Option C** is incorrect. The cost of goods sold (COGS) is usually the largest expense for product-based companies and has a direct link to sales, often forecasted as a percentage of sales or gross margin. While SG&A expenses may have some variability, their overall relationship with revenues is generally less direct compared to COGS.
Author: LeetQuiz Editorial Team
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Which of the following statements regarding the forecasting of selling, general, and administrative (SG&A) expenses is most accurate?
A
General corporate costs are primarily variable in nature.
B
Selling and distribution expenses can be effectively modeled as a proportion of sales.
C
SG&A expenses exhibit a stronger direct correlation with revenues compared to the cost of goods sold.