Administrative‐Expense Budget

The administrative‐expense budget is an important link with all budgets of a management firm, because it comprises activities that support other budgeted activities and at the same time provides some elements of control. To improve performance and productivity, management focuses on administrative expenses. Administrative expenses are somewhat straightforward, but the value of the activities for which administrative expenses are incurred—that is, why administrative expenses are consumed by administrative activities—is not as straightforward. Therefore, the administrative expense budget is one of the more difficult budgets to manage because it is hard for many people to understand and agree to the value and purpose of administrative expenses.