Selling, General & Administrative (SG&A) expenses are the costs a company

incurs to promote, sell and deliver its products and services, as well as to
manage day-to-day operations. Understanding and controlling SG&A can help
companies manage their overhead, reduce costs and sustain profitability.

What Is Selling, General & Administrative

Expense (SG&A)?
SG&A expenses comprise all the day-to-day operating costs of running a
business that aren’t related to producing a good or service. This includes a
wide range of expenses, such as rent, advertising and marketing, and salaries
of management and administrative staff. SG&A does not include the direct
costs of producing goods or acquiring goods for sale, which are calculated
separately as cost of goods sold (COGS). It also excludes research and
development (R&D) costs. The amount that a company spends on SG&A may
play a key role in determining its profitability.

Key Takeaways
 Selling, General & Administrative expenses (SG&A) include all everyday
operating expenses of running a business that are not included in the
production of goods or delivery of services.
 Typical SG&A items include rent, salaries, advertising and marketing
expenses and distribution costs.
 Analyzing SG&A can help companies reduce overhead costs and increase
profitability.

Selling, General & Administrative Expense

(SG&A) Explained
 Many SG&A line items, such as rent and base salaries, are fixed costs that
must be paid regardless of production or sales volumes. Other SG&A costs,
such as distribution costs, are variable and typically change as sales volumes
rise or fall. Still others may be semi-variable, including base costs plus an
additional cost component that varies based on usage. Utilities are a classic
example of a semi-variable cost: You pay the power company a flat rate for
monthly service, plus additional costs for each kilowatt hour you use.
Especially for businesses where most SG&A costs are fixed, SG&A is used to
understand overhead or the costs a business must meet to break even.

What Are Some SG&A Typical Expenses?

Although it may vary depending on your industry, some common SG&A
expenses include the following:

 Salaries, wages and benefits for executives and staff not directly involved in
manufacturing or other production tasks
 Rent
 Utilities
 Insurance payments
 Marketing, advertising and promotion expenses
 Accounting costs
 Legal costs
 Office supplies
 Equipment not associated with manufacturing, such as office computers
referees

Management and Cost Accounting by Colin Drury • Management Information Systems by

Eardley Marshall Ritchie • Refer to Costing notes, STAMIS notes, Business Finance notes and

Quantitative notes • International Accounting Standards (IAS) • Internet

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.