Selling and Administrative Expense Budget
Selling and Administrative Expense Budget:
Learning Objectives:
- Define and explain selling and administrative budget.
- Prepare selling and administrative budget.
Definition and Explanation:
Selling and administrative expense budget lists the budgeted expenses for areas other than manufacturing. In large organizations this budget would be a compilation of many smaller, individual budgets submitted by department heads and other persons responsible for selling and administrative expenses. For example, the marketing manager in a large organization would submit a budget detailing the advertising expenses for each budget period.
Example:
Following is the selling and administrative expense budget for Hampton Freeze Inc. (See explanation of this budget)
Hampton Freeze Inc. |
|||||
Quarter |
|||||
1 | 2 | 3 | 4 | Year | |
Budgeted sales in cases (see sales budget) | 10,000 | 30,000 | 40,000 | 20,000 | 100,000 |
Variable selling and administrative expenses per case | $1.80 | $1.80 | $1.80 | 1.80 | $1.80 |
———– | ———– | ———– | ———– | ———– | |
Budgeted variable expense | $ 18,000 | $54,000 | $72,000 | $36,000 | $180,000 |
====== | ====== | ====== | ====== | ====== | |
Budgeted fixed selling and administrative expenses: | |||||
Advertising | 20,000 | 20,000 | 20,000 | 20,000 | 80,000 |
Executive salaries | 55,000 | 55,000 | 55,000 | 55,000 | 220,000 |
Insurance | 1,900 | 37,750 | 39,650 | ||
Property taxes | 18,150 | 18,150 | |||
Depreciation | 10,000 | 10,000 | 10,000 | 10,000 | 40,000 |
———— | ———— | ———— | ———— | ———— | |
Total budgeted fixed selling and administrative exp. | 85,000 | 86,900 | 122,750 | 103,150 | 397,800 |
———— | ———— | ———— | ———— | ———— | |
Total budgeted selling and administrative expenses | 103,000 | 140,900 | 194,750 | 139,150 | 577,800 |
Less depreciation | 10,000 | 10,000 | 10,000 | 10,000 | 40,000 |
———— | ———— | ———— | ———— | ———— | |
Cash disbursements for selling and administrative exp. | $93,000 | $130,900 | $184,750 | $129,150 | $537,800 |
====== | ====== | ====== | ====== | ====== |
Explanation of Selling and Administrative Expense Budget for Hampton Freeze Inc.
Like the manufacturing overhead budget the selling and administrative expense budget is divided into variable and fixed cost components. In the above example the variable selling and administrative expense is $1.80 per case. Consequently, budgeted sales in cases for each quarter are entered at the top of the schedule. These data are taken from the sales budget (see sales budget). The budgeted variable selling and administrative expenses are determined by multiplying the budgeted sales in cases by the variable selling and administrative expense per case. For example, the budgeted variable selling and administrative expense for the first quarter is $18,000 (10,000 cases × $1.80 per case). The fixed selling and administrative expenses (all given data) are then added to the variable selling and administrative expenses to arrive at the total budgeted selling and administrative expenses. Finally, to determine the cash disbursement for selling and administrative items, total budgeted selling and administrative expense is adjusted by adding back non-cash selling and administrative expenses (in this case, just depreciation).
You may also be interested in other articles from “Budgeting and planning” chapter:
- Profit Planning
- Participative or Self Imposed budgeting
- Human Factors in Budgeting
- Zero Based Budgeting (ZBB)
- Budget Committee
- Master Budget
- Sales Budget
- Production Budget
- Inventory Purchases Budget for a Merchandising Firm
- Material Budgeting | Direct Materials Budget
- Labor Budget
- Manufacturing Overhead Budget
- Ending Finished Goods Inventory Budget
- Selling and Administrative Expense Budget
- Cash Budget
- Budgeted Income Statement
- Budgeted Balance Sheet
- International Aspects of Budgeting
Other Related Accounting Articles:
- Manufacturing Overhead Budget
- Direct Labor Budget
- Ending Finished Goods Inventory Budget
- Material Budgeting | Direct Materials Budget
- Inventory Purchases Budget for a Merchandising Firm
- Fixed Budget
- International Aspects of Budgeting
- Budgeting Methods: How to choose one for your business
- Zero Based Budgeting (ZBB):
- Human Factors in Budgeting
Or
Download E accounting book in MS-word format for just 20 $ - Click here to Download