Chapter 22, Problem 2BTN

To determine

Introduction:

Selling and general administrative expenses are generally related to non core activities and yet it has to be incurred. To provide a check on such companies – company make a budget by linking it to expected Sales Levels. This provides a very useful yardstick to monitor and ensure that such expenses are not rising out of proportions.

1. To Determine

Compute the Three years sales and Selling and General Administrative expenses of three Years.

Answer to Problem 2BTN

Solution:

Apple
Details	Year ended Sept 26, 2015	Year Ended Sept 27, 2014	Year Ended Sept 28, 2013
	$ Millions	$ Millions	$ Millions
Net Sales	233,715	182,795	170,910
Selling General and Administrative Expenses	14,329	11,993	10,830
Ratio of Net Sales	6.1%	6.6%	6.3%

Alphabet ( Google)
Details	Year ended December 31, 2016	Year ended December 31, 2015	Year ended December 31, 2014
	$ Millions	$ Millions	$ Millions
Net Sales	90,272	74,989	66,001
Selling and Marketing Expenses	10,485	9,047	8,131
General & Administrative Exp	6,985	6,136	5,851
Sub Total	17,470	15,183	13,982
Ratio of Net Sales	19.4%	20.2%	21.2%

Explanation of Solution

Explanation:

Downloaded respective annual report and tabulated the figures.

Conclusion

Conclusion:

Required Figures are tabulated above.

To determine

Introduction:

Selling and general administrative expenses are generally related to non core activities and yet it has to be incurred. To provide a check on such companies – company make a budget by linking it to expected Sales Levels. This provides a very useful yardstick to monitor and ensure that such expenses are not rising out of proportions.

2. To Determine

Compute the ratio of Selling and General Administrative expenses as a percentage of net sales.

Answer to Problem 2BTN

Solution:

Apple
Details	Year ended Sept 26, 2015	Year Ended Sept 27, 2014	Year Ended Sept 28, 2013
	$ Millions	$ Millions	$ Millions
Net Sales	233,715	182,795	170,910
Selling General and Administrative Expenses	14,329	11,993	10,830
Ratio of Net Sales	6.1%	6.6%	6.3%

Alphabet ( Google)
Details	Year ended December 31, 2016	Year ended December 31, 2015	Year ended December 31, 2014
	$ Millions	$ Millions	$ Millions
Net Sales	90,272	74,989	66,001
Selling and Marketing Expenses	10,485	9,047	8,131
General & Administrative Exp	6,985	6,136	5,851
Sub Total	17,470	15,183	13,982
Ratio of Net Sales	19.4%	20.2%	21.2%

Explanation of Solution

Explanation:

Downloaded respective annual report and tabulated the figures.

Conclusion

Conclusion:

Ratio of Selling and General Administrative Expenses to net Sales is as follows

Apple:

Details	Year ended Sept 26, 2015	Year Ended Sept 27, 2014	Year Ended Sept 28, 2013
Ratio of Net Sales	6.1%	6.6%	6.3%

Alphabet (Google)
Details	Year ended December 31, 2016	Year ended December 31, 2015	Year ended December 31, 2014
Ratio of Net Sales	19.4%	20.2%	21.2%

Selling and general administrative expenses are generally related to non core activities and yet it has to be incurred. To provide a check on such companies – company make a budget by linking it to expected Sales Levels. This provides a very useful yardstick to monitor and ensure that such expenses are not rising out of proportions.

To determine

3. To Determine

Using the data from part 2 – we have to predict data for two more years and compare with actual if possible.

Explanation of Solution

Apple
Details	Projection Year 2017	Projection Year 2016	Year ended Sept 26, 2015	Year Ended Sept 27, 2014	Year Ended Sept 28, 2013	Total of three years actual
	$ Millions	$ Millions	$ Millions	$ Millions	$ Millions	$ Millions
Net Sales	319,932	273,447	233,715	182,795	170,910	587,420
Selling General and Administrative Expenses	20,234	17,294	14,329	11,993	10,830	37,152
Ratio of Net Sales	6.3%	6.3%	6.1%	6.6%	6.3%	6.3%
	Growth of 17% in Net Sales	Growth of 17% in net Sales	1.278563418	1.069539524
	Ratio of Selling and General Administrative is maintained based on three years sales
Alphabet ( Google)
Details	Projection Year 2018	Projection Year 2017	Year ended December 31, 2016	Year ended December 31, 2015	Year ended December 31, 2014	Total of three years actual
	$ Millions	$ Millions	$ Millions	$ Millions	$ Millions	$ Millions
Net Sales	123,573	105,618	90,272	74,989	66,001	231,262
Selling and Marketing Expenses	14782	12,634	10,485	9,047	8,131	27,663
General & Administrative Exp	10138	8,665	6,985	6,136	5,851	18,972
Sub Total	24,920	21,299	17,470	15,183	13,982	46,635
Ratio of Net Sales	20.2%	20.2%	19.4%	20.2%	21.2%	20.2%
	Growth of 17% in net Sales	Growth of 17% in net Sales
	Ratio of Selling and General Administrative is maintained based on three years sales

Comparison with Actuals is not done as 2018 is still in progress for Alphabet (Google) and Published results were not available for 2017.

Conclusion

Cumulative Sales growth of 17% is maintained for first two years by both companies and is likely to continue. Selling and general administrative expenses for Apple (average for three years) is 6.2% and is likely to continue. Selling and General Expenses for Alphabet (Google Parent) was 20.2% for three years and is likely to continue for two more years. Another interesting observation – Apple is more of a product company and Alphabet is more of a service company and accordingly our expenses are also determined by Industry in which we operate.