Question

How to prepare the company’s selling and administrative expense budget for the fiscal year?

Answer 1

The selling and administrative expense budget makes up part of a company's pro forma, or budgeted, profit and loss statement. This portion of the budget includes the planned operating expenses for the business, excluding its direct costs of manufacturing. The company's manufacturing costs get classified as "Cost of Goods Sold" and have their own category on the budgeted profit and loss statement.

Selling and administrative costs, also known as selling, general, and administrative (SG&A) costs, including expenses associated with running the overall business, such as the costs for clerical labor, rent, office supplies, and other ​overhead. A company's master budget profit and loss statement include these expenses along with sales revenue, cost of goods sold, and other expenses, such as interest and depreciation.