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? As portfolio activities are to be self-reflective, please make sure to connect the portfolio assignment to: Your personal experiences. Reflect on how this assignment topic is applicable to and will benefit you. Course readings and any external readings. Discussion forum posts or course objectives. The Portfolio Activity entry should be a minimum of 500 words and not more than 750 words. Use APA citations and references if you use ideas from the readings or other sources. I selected IKEA furniture company.

Answer 1

Selling Expenses :

Selling expenses are those that the Company incurs indirectly in selling the product. It is like operating expenses of a Company. Selling expenses include distribution, marketing and selling costs. Distribution costs like shipping costs, insurance, logistics ; marketing costs like advertisements, promotions ; selling costs like wages , commission etc,. form a part of selling expenses.

Administrative expenses:

Administrative expenses are the expenses an organization incurs not directly tied to a specific function such as manufacturing, production, or sales. Salaries of executives, costs incurred in implementing technology are examples of Administrative expenses.

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. 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. 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

Suppose I am ready to start a Business of selling Solar panels. First, the costs incurred in procuring the raw materials that are required in building the panel is known as product cost. Once I am done with producing the panels, I 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 panels, I would be incurring costs for transport or shipping. Such operating expenses are the administrative expenses.