Investigate SG&A Budget Variance

Business Context

BrightCart, a mid-market e-commerce retailer, closed Q2 with SG&A expense materially above plan. The CFO wants a structured metric-based investigation before the monthly operating review.

Metric Scenario

Budgeted Q2 SG&A was $24.0M, while actual SG&A came in at $28.8M, a $4.8M unfavorable variance (+20%). Revenue was $96M vs $100M budget (-4%), so SG&A as a percent of revenue increased from a budgeted 24.0% to an actual 30.0%. The largest SG&A line items were: marketing $9.5M actual vs $7.0M budget, payroll $10.2M vs $9.6M, software/tools $2.4M vs $1.8M, facilities $1.9M vs $2.0M, and G&A other $4.8M vs $3.6M. Headcount averaged 1,020 actual vs 980 budget, and paid orders were 3.2M actual vs 3.5M budget.

Leadership is asking whether the variance is driven by volume, timing, price/rate changes, one-time items, or weak budget assumptions, and which drivers are likely to persist into Q3.

Requirements

1. Define the primary SG&A variance metric and the supporting efficiency metrics you would use.
2. Break the variance into meaningful components such as fixed vs variable, rate vs volume, and recurring vs non-recurring.
3. Identify the first cuts of analysis you would perform and the hypotheses you would test.
4. Explain how you would determine whether this is a controllable operating issue or a planning issue.
5. Recommend actions leadership should take for Q3 forecasting and cost control.

Data Available

• gl_actuals: monthly actual expenses by cost center, account, department, vendor, and region
• budget_plan: monthly budget by cost center, account, department, and driver assumptions
• headcount_roster: employee-level start date, department, level, compensation, and location
• marketing_spend: campaign-level spend, channel, impressions, clicks, and attributed orders
• vendor_contracts: software, consulting, and facilities contract terms, renewal dates, and pricing changes