Sales representatives' expenses, such as meals and entertainment A company incurs these expenses to generate sales and are directly related to the company's sales activities. Selling expenses are a subset of Selling, General, and Administrative (SG&A) expenses and refer to the costs incurred by a company in selling its products or services.
On the other hand, low SG & A expenses indicate that a company is operating more efficiently and has a lower cost structure, which is a positive indicator of future profitability. High SG&A expenses indicate that a company needs to spend more on overhead and may need to generate more revenue to cover these costs. SG&A is an essential metric for investors, as it helps to measure a company's efficiency and the effectiveness of its operating model.
A company incurs these expenses regardless of whether they generate or do not generate sales and are typically a significant component of a company's operating expenses.
Selling general and administrative expenses professional#
SG&A includes salaries and wages, rent, utilities, advertising, marketing, legal and professional fees, insurance, office supplies, and other overhead costs. Selling, General, and Administrative expenses (SG&A) are the costs incurred by a company in its daily operations, excluding the costs of producing goods or services. Rent, depreciation, and other expenses could be forecast using similar calculations based on contracts and commitments as well as planned expansion or contraction.What are Selling, General, and Administrative Expenses (SG&A)? Similarly, if the CEO makes $500,000, and the CFO makes $300,000, and they have three support staff each making $50,000, total general and administrative salaries would be $950,000. Managers must also estimate other expenses such as interest expense, income tax expense, and research and development expenses.įor GelSoft, the administration will look at selling, general, and administrative costs both historically and prospectively, applying cost increases and cost-cutting measures to the costs or using a zero-based budgeting process that looks at the budget for each year as if it was the first year, taking current and proposed costs and building the budget from scratch.įor instance, the company has seven full-time, non-commissioned sales staff making $50,000 each year and plans to add three more during the year. salaries of administrative personnel and depreciation of administrative buildings and office equipment). Commissions are a good example of this.Īdministrative expenses are likely to be less dependent on the sales forecast because many of the items are fixed costs (e.g. However, some costs have a direct relationship to sales. For instance, if the competition is robust, or if the market is saturated, increasing advertising and other marketing expenses may not increase sales. More advertising may mean more sales, but that is not always the case. This relationship is also the inverse-there is a relationship between the amount spent on marketing and sales revenue. Generally, the higher the forecast, the higher the selling expenses. The costs of selling a product are often closely related to the sales forecast. Prepare a selling, general, and administrative budget.
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