Which cost category includes general and administrative expenses?

Which cost category includes general and administrative expenses?

• A. Indirect Costs
• B. Direct Labor Costs
• C. Material Costs
• D. Travel Expenses

Answer: (A)

General and administrative expenses are indirect costs because they support the entire operation and can’t be traced to a single product or project. They represent overhead that keeps the business running, such as leadership salaries, accounting, utilities, and other shared services. In contrast, direct labor costs are the wages of workers who directly manufacture a product and can be assigned to a specific cost object, while material costs refer to raw materials used to make that product and are likewise traceable to the cost object. Travel expenses can be classified separately depending on purpose, but when considering overhead, general and administrative expenses fall under indirect costs since they aren’t tied to one specific product or project.

General and administrative expenses are indirect costs because they support the entire operation and can’t be traced to a single product or project. They represent overhead that keeps the business running, such as leadership salaries, accounting, utilities, and other shared services. In contrast, direct labor costs are the wages of workers who directly manufacture a product and can be assigned to a specific cost object, while material costs refer to raw materials used to make that product and are likewise traceable to the cost object. Travel expenses can be classified separately depending on purpose, but when considering overhead, general and administrative expenses fall under indirect costs since they aren’t tied to one specific product or project.