Selling and Administrative Expense Budget
Selling and administrative expense budget is a schedule of planned operating expenses other than manufacturing costs. It is a component of master budget and it is prepared by all types of businesses (i.e. manufacturers, retailers and service providers) before the preparation of budgeted income statement. Usually it is divided in two sections: the selling expenses and the administrative expenses.
Both selling expenses and administrative expense may be fixed or variable (see cost behaviour). For example sales commission and freight cost on sales are variable selling expenses where as sales salaries are fixed selling expenses. Similarly depreciation and rent on office building are fixed administrative expenses whereas office supplies and utilities expense are variable administrative expenses.
Different variable selling and administrative expenses vary with different types activities. For example sales commission vary with number of units sold, entertainment expenses with number of employees in the organization etc., therefore an accurate selling and administrative expenses budget can be made by using activity based costing.
Format and Example
The following example illustrates the format of a typical selling and administrative expense budget:
| Company A | |||||
| Selling and Administrative Expense Budget | |||||
| For the Year Ending December 30, 2010 | |||||
| Quarter | |||||
| 1 | 2 | 3 | 4 | Year | |
| Budgeted Selling Expenses: | |||||
| Sales Commission | $2,620 | $2,380 | $2,410 | $3,590 | $11,000 |
| Freight-out | 3,890 | 3,510 | 3,050 | 5,030 | 15,480 |
| Budgeted Admin. Expenses: | |||||
| Office Rent | 8,000 | 8,000 | 8,000 | 8,000 | 32,000 |
| Office Salaries | 10,000 | 10,000 | 10,000 | 10,000 | 40,000 |
| Office Supplies | 1,120 | 1,030 | 1,560 | 2,370 | 6,080 |
| Miscellaneous Expenses | 700 | 700 | 700 | 700 | 2,800 |
| Total Selling & Admin. Expense | $26,330 | $25,620 | $25,720 | $29,690 | $107,360 |
by Irfanullah Jan, ACCA and last modified on