Question

Classify the expenses below as (i) cost of sales, (ii) selling and distribution expenses, (iii) administrative expenses, (iv) other operating expenses (income).

1. Head office salaries

2. Salaries of staff involved in the production

3. Warehouse insurance

4. Advertising costs

5. Accounting fees

6. Bad debts

7. Subcontracting costs related to production

Answer 1

Based on the information available in the question, we can answer as follows:-

1.) Head office salaries - Administrative expenses;

2.) Salaries of the staff in the production - Cost of Sales;

3.) Warehouse Insurance - Cost of sales

4.) Advertising costs - Selling and distribution expenses

5.) Accounting fees - Administrative expenses

6.) Bad Debts - Other operating expenses (income)

7.) Subcontracting costs related to production - Cost of sales.

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