The sales to administrative expenses ratio is a measure that provides really important context for an amount of sales that a company is reporting. General and administrative expenses are the costs incurred by a business as a result of carrying out the day-to-day operations. Statement of cash flows formula. ... (Selling expenses /Net sales ) × 100 (45,000 / 750,000) × 100. Selling expenses (9,000 x $0.20 per unit) 1,800 Total variable costs 31,500: Contribution Margin 40,500: Fixed Costs: Fixed overhead (fixed portion only) 6,000 Selling expenses (fixed portion only) 15,000 Administrative expenses 12,000 Total Fixed expenses 33,000: Net Operating Income $ 7,500 The selling expenses are 6% of net sales. In aggregate, this budget can rival the size of the production budget, and so is worthy of considerable attention. The ratio will essentially tell you how much the company is spending in order to maintain that level of sales volume. A low ratio could reveal inefficiencies in your business. Other expenses, such as selling, general, and administrative (SG and A) expenses, are subtracted to arrive at net income. The selling and administrative expenses included $14,500 for depreciation. Operating income (earnings) Gross profit – selling, general, and administrative (SG and A) expenses. The selling and administrative expense budget is comprised of the budgets of all non-manufacturing departments, such as the sales, marketing, accounting, engineering, and facilities departments. Mathematically, it is represented as, Cash disbursements for selling and administrative expense: $9,750: $9,750: $9,750: $9,750: $39,000: Note: because depreciation expense is a non-cash expense, we can subtract it for our cash budget preparation, but we still need the number for our overall budget and financial statements to get an overall picture of the health of our company! Calculate Cash Flow from Operations using Indirect Method The following additional information is available A D V E R T I S E M E N T. Write your cost formula and plug in the number of units sold for the activity. Selling to Administrative Expense Ratio = Sales / Administrative Expenses The higher this SAE ratio is, the better it is for your business. In this case, the variable rate is $5 per unit and the fixed cost is $112,000. Therefore, you should treat the selling and administrative costs like a mixed cost. ABC Corporation’s income statement sales was $650,000; gross profit of $350,000; selling and administrative costs of $140,000; and income taxes of $40,000. What is the Selling and Administrative Expense Budget? Formula: The numerator may be an individual expense or a group of expenses such as administrative expenses, sales expenses or cost of goods sold. Selling and administrative expenses can be variable or fixed. 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