Selling and Administrative Expense Budget

The video explains the concept of budgets, focusing on selling and administrative expense budgets, which are related to non-manufacturing activities. It discusses the creation of budgets for different departments, often seen in larger organizations, and the typical short-term nature of these budgets. Two main approaches to budgeting are covered: activity-based costing, which is complex due to overhead allocation, and incremental budgeting, which relies on historical data but may not always predict future needs accurately.

What is the primary focus of a selling and administrative expense budget?

• Product design

• Research and development

• Non-manufacturing activities

• Manufacturing activities

Which departments are typically included in selling and administrative budgets?

• Sales, marketing, and administration

• Production, logistics, and quality control

• Research, development, and testing

• Design, engineering, and prototyping

How are selling and administrative budgets usually presented?

• Bi-annually

• Daily

• Monthly or quarterly

• Annually

What is a key challenge of using activity-based costing for budgeting?

• It is only suitable for small organizations

• It is too simple

• It requires precise overhead allocation

• It ignores past data

Why might incremental budgeting be considered less favorable?

• It is too complex

• It relies heavily on historical data

• It requires extensive forecasting

• It is only applicable to large organizations