Question

Which of the following describes the selling and administrative expenses budget?

A) It aids in planning to ensure the company has adequate inventory on hand.
B) It captures the variable and fixed components of selling and administrative expenses of the business.
C) It depicts the breakdown of sales based on terms of collection.
D) It shows the cash flows related to the selling and administrative expenses and helps in planning to ensure the business has adequate cash.

Answer 1

The selling and administrative expenses budget captures both variable and fixed expenses of a business, enabling accurate financial planning and cost management.

Step-by-step explanation:

The selling and administrative expenses budget captures the variable and fixed components of selling and administrative expenses of the business. This type of budget considers the stable nature of fixed costs, such as rent and equipment, which do not change with the level of production, and variable costs that can fluctuate based on business activity. By planning for these expenses, the business can ensure it has the proper funding to cover its operational costs and can make strategic decisions regarding spending and cost management.