Definition: A selling expense budget is a plan that estimates the selling expenses that will occur in the period. A selling expenses are any costs related with marketing and selling a product to customers. These expenses usually include store displays, signs, advertising campaigns, and delivery costs to customers.
What Does Selling Expense Budget Mean?
The selling expense budget is usually based on the sales budget and the prior expense budgets in prior years. Management first creates the master budget and sales budget to set the overall company goals for the period.
The selling expense budget is then prepared by the vice president of marketing or a high level sales manager to list out and estimate the future selling expenses required to meet the sales goals of the company. In other words, if management sets a goal of increasing sales by 10 percent, the marketing department must estimate the amount of selling expenses that will be needed to increase sales to meet the goals.
As with all budgets, the estimated or predicted expenses are not always accurate. Some expenses are easy to predict though. Let’s take a look at an example.
Take a retailer for example. A retailer employs salesmen who actively sell their products to customers. The salesmen are paid hourly and with commissions based on how much they sell. Since salesmen are part of the selling process, their salaries and commissions are both considered selling expenses.
The salaries are easy to estimate because they will stay the same year over year with the occasional raise. The commissions are based on sales, however. Taking our earlier example that management wants to increase sales by 10 percent, they would also have to increase the estimated commissions expense by 10 percent.
All of the other selling expenses would also have to be estimated and listed in the budget.