A) What is typically considered part of SG&A? Select the two correct answers.
factory costs
billing costs
commissions
wages payable
materials costs
The correct answers are billing costs and commissions.
The two correct answers for what is typically considered part of SG&A (Selling, General, and Administrative Expenses) are:
1. Billing costs: These costs include expenses related to invoicing, collecting payments, and managing customer accounts.
2. Commissions: These are the costs associated with sales commissions paid to employees or external agents for generating sales.
The other options listed (factory costs, wages payable, and materials costs) are not typically included in SG&A, as they are more related to the cost of goods sold (COGS) or other operating expenses.
To determine which two options are typically considered part of Selling, General, and Administrative (SG&A) expenses, we need to understand the nature of these expenses.
SG&A expenses are the operating costs of a business that are not directly related to the production or manufacturing of goods or services. They typically include expenses incurred in selling the products or services, as well as general administrative costs.
Now, let's analyze each option:
A) Factory costs: Factory costs are usually associated with direct manufacturing or production activities, such as the cost of raw materials, labor, and equipment in the production process. These costs are not part of SG&A expenses. Therefore, factory costs are not typically considered part of SG&A.
B) Billing costs: Billing costs often include expenses related to invoicing, billing software, personnel, and any other expenses incurred in the billing process. These expenses are considered administrative in nature and are indeed part of SG&A expenses. Therefore, billing costs can be considered part of SG&A.
C) Commissions: Commissions are typically paid to sales representatives or agents based on the sale of goods or services. Since these expenses relate directly to the selling function, they are part of SG&A expenses. Therefore, commissions can be considered part of SG&A.
D) Wages payable: Wages payable generally pertain to employee compensation, including salaries, wages, and benefits. Since these expenses are administrative in nature, they are typically included in SG&A expenses. Therefore, wages payable can be considered part of SG&A.
E) Materials costs: Materials costs refer to the expenses associated with purchasing raw materials or components used in the manufacturing process. Similar to factory costs, these costs are generally considered direct manufacturing expenses and are not part of SG&A expenses. Therefore, materials costs are not typically considered part of SG&A.
Based on the analysis above, the two correct answers for what is typically considered part of SG&A are:
- Billing costs
- Commissions