The formula used for percentage of sales is quite simple. It entails figuring out the total amount of sales which is equal to one hundred percent. The particular method used is a portion of the total sales.

'Percentage of Credit Sales Method'

The percent of sales method of forecasting needs to based on a series of assumptions, and the forecasting would heavily relay on the percent of sales as the key tool for forecasting. Furthermore, the percentage of sales for the next period cannot prevent the forecasting result from the expectations of the investors.

It is the method of budgeting promotions based on current revenues through sales. The basic advantage to this marketing budget setting is the simplicity and ability for marketing management to watch the relationship between promotion and sales. This method does receive more scrutiny than most other methods however. The debate is that this method shows cause and effect when in reality it is effect and cause.

No. It is not practical or correct to use both methods as the same time. According to GAAP, each method is accepted, but management must choose which method to use, independently of the other.