Selling Expenses Budget
Selling Expense Budget is the estimated amount spend on selling expenses that will incur in one accounting period. Besides the manufacturing cost, the company will spend on the selling and administrative expenses which are not dependent on the production units. They are mostly the fixed cost that will be paid base on monthly basis.
Selling expenses are the cost relate to marketing and getting the product to target customers. They are the expense for the sales department such as salary, commission expenses, advertising, and other marketing campaign.
It is one part of the master budget that supports the company’s main goal. It must support the master plan in order to ensure that the target profit is meet.
Selling Expenses Budget Example
For example, the company is preparing next year’s budget which consists of the target net profit and sale volume. Sale department will responsible for selling expenses budget such as:
- Advertising budget which should reflect with a sale target.
- Promotional budget: the amount which response with new products announce and new market expand
- Commission expense: this should be based on the percentage of sale volume. The percentage will depend on the company policy.
- Salary: The budget should include the expected salary for the new staff in case the target sale requires more people and it should include the increment too.
These are the budget for selling expenses which should be put under the sales department.
Prepare Selling Expense Budget
Selling expense is a part of the income statement budget. The selling expense budget will reduce the profit of the company. The company needs to make a proper budget as it will impact the target net income.
The company needs to make enough selling expenses to achieve the target sell. We need to promote the product to increase the sale. Without proper estimation of the selling expense, we may face a huge expense that will reduce the profit.
Selling expenses usually prepared by the head of the marketing department. The company has enough experience regarding the connection between the selling expense and the sale amount. It is different from one company to another. Some company’s sale requires a certain percentage of the expense. While other companies do not depend on the selling expense to generate a sale. If the company wants to double the revenue, it may require to double the selling expenses.