CAT / FIA FMA Syllabus A. The Nature, Source And Purpose Of Management Informa - Different elements of non production costs - Notes ^{2 / 9}

Administrative costs

These include all the costs involved in running the general administration department of an organisation.

Examples of administrative costs include:

• Depreciation of office buildings and equipment.

• Office salaries, including salaries of directors, secretaries and accountants.

• Rent, rates, insurance, lighting, cleaning, telephone charges and others.

Selling costs

Selling costs include all costs incurred in promoting sales and retaining customers. 

Examples of selling costs are:

• Salaries and commission of salesmen and sales department staff.

• Advertising and sales promotion, market research.

• Rent, rates and insurance of sales offices and showroom.

Distribution costs

Distribution costs include all costs incurred in making the packed product ready for dispatch and delivering it to the customer. 

Examples of distribution overhead are:

• Delivery costs

• Wages of packers, drivers and despatch clerks.

• Insurance charges, rent, rates and depreciation of warehouse.

Finance costs include all the costs that are incurred in order to finance an organisation, for e.g. loan interest.

Non-production costs are taken directly to the income statement as expenses in the period in which they are incurred.