From the course: Accounting Foundations: Budgeting

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Overhead and SG&A budget example for a service firm

Overhead and SG&A budget example for a service firm

From the course: Accounting Foundations: Budgeting

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Overhead and SG&A budget example for a service firm

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- As was the case with manufacturing firms, the service company overhead budget includes all the support or infrastructure costs associated with providing the product or in this case the service. The overhead budget does not include selling and administrative costs not directly associated with providing the service. That's a different budget. So for the Boulder View Inn, overhead costs include utilities, depreciation, TV and telephone services, and miscellaneous expenses. In this case, all overhead costs are fixed. In other words, regardless of whether or not a room is rented, these overhead costs are incurred. The overhead budget for Boulder View looks like this. The utilities include heat, lights, sewer, and garbage removal. The loan costs represent the actual cash outflow required to make the mortgage payment for the building itself. You can see in this overhead budget that we have good news and bad news. The good news is that with all the overhead costs being fixed, this is a…

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