Question

Look at (Aplle Inc. as a technology company), discuss how the income statement budget would be created for a year starting with the sales budget through the SG&A budget. Be sure to: Be specific in describing the component line items of each Identify the individuals that would be involved in developing the budgets

Answer 1

The preparation of Budget comes under the Financial Planning and Analysis (FP&A) Department. Hence in Aplle technology company, fp&a head is responsible.

Starting with the sales budget preparation, following factors should be considered

A) Micro Basis

B) Macro Basis

* Micro basis defines the factors which are have a eligible ability to impact the sale of the organisation. This factors are commonly found within the organisation. Like the ability of company to employ what number of sales staff, staffing of such personnel in which demographic areas.

*Further under Macro basis, the factors which affect the companies sales. These factors are generally from the outside market. In other words these factors are the factors affecting the company from the outside world. Like government regulations on the technology, user preference for technology etc.

Both the above factors should be considered while framing the sales number of any Budget or Forecast.

SG&A means the expense associated with sales whether directly or indirectly. It refers to selling general and administration costs. The selling expense is considered as variable nature hence the sales amount affects the selling cost which includes sales commission etc. And other cost like general cost should be based on the certain criteria required to meet the budget sales. In other word calculate the cost associated to achieve the budgeted sales.