Question

This week we focused on manufacturing costs, but selling, general, and administrative (SG&A) costs are also important. Using the company you selected for the discussion forum question, what specific types of SG & A costs would the company incur? How would these costs be considered in product costing? The Portfolio Activity entry should be a minimum of 650 words.

Using the company you selected for the discussion forum; I chose Microsoft Corporation.

Please Note:

Please do not plagiarize.

Please do not send an image, please type.

Answer 1

Solution :

Selling, general and administrative expense (SG& A)is reported on the income statementas the sum of all direct and indirect selling expenses and all general and administrative expenses(G and A) of a company. SG&A , also known as SGA , includes all the costs not directly tied to making a product or performing a service. That is , SG&A includes the costs to sell and deliver products and services and the costs to manage the company.

SG&A is not assigned to manufacturing costs as it deals with all the other factors that come with creating a product. This includes the salaries of various department staff such as accounting , IT, marketing, human resources, etc. It also includes commissions, advertising, and any promotional materials. In addition, rent, utilities, and supplies that are not part of manufacturing are included in SG&A.

Selling Expenses in SG&A

Selling expenses can be broken down into direct and indirect costs associated with selling a product. Direct selling expenses only occur when the product is sold and may include shipping supplies, delivery charges, and sales commissions. Indirect selling expenses are costs that occur throughout the manufacturing process and after the product is finished. Indirect selling expenses include product advertising and marketing , telephone bills, travel costs, and the salaries of sales personnel.

General and Administrative Expenses (G&A) in SG&A

G&A expenses are referred to as the overhead of the company. These are the costs a company must incur to open the doors each day. G&A expenses are incurred in the day-to-day operations of a business and may not be directly tied to any specific function or department within the company. They are more fixed than selling costs because they include rent or mortgage on buildings , utilities, and insurance. G&A costs also include salaries of personnel in certain departments, other than those related to sales or production.  

Product costing is nothing but the costs that are incurred directly in producing a product. Suppose, the company is incurring expenses on purchasing inventory then it is considered as product cost. Suppose am ready to start a business of selling bags. First , the costs incurred in procuring the raw materials that are required in production of the bag is known as product cost. Once i am done with producing the bags, am ready to sell the product. In order to make my product reachable to the audience, i will be spending on advertisements and promotions. Such costs form part of the selling expenses. Once i have got orders to deliver bags, i would be incurring costs for transport or shipping. Such operating expenses are the administrative expenses.