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Selling and Administrative Expense Budget:

Learning Objectives:

1. Define and explain selling and administrative budget.
2. 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. Selling and Administrative Expense Budget For the Year Ended December 31, 2009
	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:

1. Profit Planning
2. Participative or Self Imposed budgeting
3. Human Factors in Budgeting
4. Zero Based Budgeting (ZBB)
5. Budget Committee
6. Master Budget
7. Sales Budget
8. Production Budget
9. Inventory Purchases Budget for a Merchandising Firm
10. Material Budgeting | Direct Materials Budget
11. Labor Budget
12. Manufacturing Overhead Budget
13. Ending Finished Goods Inventory Budget
14. Selling and Administrative Expense Budget
15. Cash Budget
16. Budgeted Income Statement
17. Budgeted Balance Sheet
18. International Aspects of Budgeting

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