Selling and administrative (S&A) expenses

Definition

Selling and administrative (S&A) expenses are costs not directly tied to the production of goods or services. They include expenses such as salaries, advertising, and office supplies.

5 Must Know Facts For Your Next Test

1. S&A expenses are considered period costs and are expensed in the period they occur.
2. These costs do not vary with production levels but can fluctuate based on other business activities.
3. S&A expenses are reported separately from cost of goods sold (COGS) on the income statement.
4. In job order costing, S&A expenses are not allocated to specific jobs but treated as overhead.
5. In process costing, S&A expenses remain consistent as they are not linked to the manufacturing process.

Review Questions

• What types of costs fall under selling and administrative expenses?
• How are S&A expenses treated in job order costing compared to process costing?
• Why are S&A expenses categorized as period costs?

Related terms

Period Costs: Expenses that are recognized in the period they occur, unrelated to production volume.

Cost of Goods Sold (COGS): Direct costs attributable to the production of goods sold by a company.

Overhead: Indirect costs involved in running a business that cannot be directly tied to a specific product or job.