Preparing an Operating Budget—Cost of Goods Sold, SG&A, and Operating Income

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Estimating SG&A

Selling, general, and administrative costs can include costs generated by research and development, product design, marketing, distribution, customer service, commissions, administration, and overhead. In the example below, only marketing and administrative expenses make up the SG&A budget.


SG&A: Year 2 Budget

  

Actual

Year 1

Year 2 Budget

Rate of Change

Sales, general, and administrative costs:

Sales salaries

$220,000

$291,200

32.4%

Advertising expenses

$45,000

$51,000

13.3%

Miscellaneous selling expenses

$4,200

$3,900

(7.1%)

Office expenses

$92,000

$94,500

2.7%

Total SG&A

$361,200

$440,600

22.0%

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