Help with Capsim SG&A Expenses

Selling, general, and administrative costs (SG&A), often known as operating expenses, are any costs incurred by your company that are not directly related to the production or delivery of your product or service. It’s a broad “catch-all” category that encompasses pretty much anything you spend money on that isn’t a cost of products sold (COGS). Let’s imagine your imaginary company, XYZ Soaps Inc., handcrafts handmade soaps and sells them online. Are you looking for Help with Capsim SG&A Expenses? Worry no more! We got you covered!

COGS are any costs directly associated to creating, packing, and transporting the soaps, such as raw materials, salary paid to your soap maker Cheryl, fancy packaging paper, shipping fees, and so on. Your SG&A expenses are simply any money you spend on your business, such as all of your Facebook and Google ads, your monthly Shopify subscription, the charge you paid the illustrator who produced your new logo, and so on.

What is the formula for calculating SG&A?

When putting together an income statement, you’ll usually compute SG&A.

To figure out the entire SG&A for an annual income statement, go through your company’s accounts for that year and add up all of the non-COGS, interest, and income tax charges you observe.

What are some examples of average SG&A costs?

Selling expenses, general expenses, and administrative expenses are the three types of expenses that normally fall under the SG&A category. Certain non-operating expenses may be included in SG&A in some situations.

Costs of selling

These are any sales or marketing costs incurred by your company. These fees can include items like: • Advertising costs (i.e. Google and Facebook ads, newspaper advertisements, billboards, etc.)

• Any wages or commissions paid to a salesperson or marketer; • Payroll taxes related with sales or marketing personnel; • Travel and entertainment expenses for business trips; (i.e. brochures, business cards, promotional videos, landing pages, etc.)

Expenses in general

These are expenses that your company incurs that have nothing to do with COGS, sales, or administration. These include the following:

• Rent; • Utilities; • Bank and ATM fees
• Costs of technology and equipment
• Insurance • Office supplies
• Subscriptions to publications (i.e. publications, software, services)
• Miscellaneous tiny petty cash charges

Costs of administration

Small firms don’t usually spend a lot of money on administration, but if they do, their administrative costs could include things like: • Salaries for company executives and administrative staff • Fees paid to on-staff accountants, IT experts, lawyers, and other professionals

• Fees for consulting

Some non-operational costs

Normally, these are listed separately from SG&A, however income statements may combine them with SG&A. Non-operating expenses are anything you spend money on that isn’t relevant to your business’s day-to-day activities, such as: • Expenses for obsolete inventory

• Legal fees • Depreciation (for incorporating a business, settling a lawsuit, etc.)

 

Profit and Loss Statement

The income statement can be used by your organization to diagnose difficulties on a product-by-product basis. Each product’s sales are stated in USD (not the number of products). The contribution margin is calculated by subtracting variable costs from revenues. The number of products in the warehouse determines the inventory carrying costs. You stocked out of the goods and most likely lost sales chances if your organization has no inventory carrying charges. Carrying costs will be expensive if your organization has too much inventory. With accurate sales estimates and realistic manufacturing schedules, inventory carrying costs will be kept to a minimum.

Depreciation is applied to sales, general, and administrative (SG&A) expenditures to create period costs (which include R&D, promotion, sales and administration expenses). The net margin is calculated by subtracting period costs from the contribution margin. The entire net margin for all products is then reduced from other expenses, which include fees and write-offs in the simulation. EBIT (earnings before interest and taxes) is calculated in this way. After subtracting interest, taxes, and profit-sharing costs, the net profit is calculated.

You can print your proforma income statement once you’ve made your final decisions (click the printer icon). You can compare the results to your proforma estimates as the simulation progresses to the next year.

Accounts Payable

The balance sheet shows the dollar value of the company’s assets (assets), liabilities (liabilities), and investor contributions (contributions) (equity). Liabilities and equity are always equivalent to assets.

Liabilities + Equity Equals Assets

Current and fixed assets are the two types of assets. Current assets are those that can be transformed quickly, usually within a year. Inventory, accounts receivable, and cash are examples of these. The term “fixed assets” refers to assets that cannot be easily converted. Fixed assets in the simulation are limited to the value of the plant and equipment.

Accounts payable, current debt, and long-term debt are all examples of liabilities. Current debt is made up of one-year bank notes, whereas long-term debt is made up of 10-year bond offerings in the simulation. Common stock and retained earnings are the two types of equity. Retained earnings are a component of the equity held by shareholders. They are not a valuable resource.

The money acquired from the selling of shares is known as common stock, whereas retained earnings refers to the percentage of profits that was not given to shareholders as dividends but was instead reinvested in the company.

Depreciation is an accounting concept that allows businesses to depreciate their fixed assets. Every year, a portion of the value is “depleted.” Depreciation reduces a company’s tax liability by lowering net earnings while also offering a more realistic picture of its plant and equipment value. Depreciation is expensed on the income statement, product by product. On the cash flow statement, the whole depreciation for the period is shown as a gain. Accumulated depreciation is deducted from the value of the plant and equipment on the balance sheet. The simulation is based on a fifteen-year straight line depreciation technique.

 

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