Question

​Jose is reviewing the operating expenses for his business. He notices that operating expenses are categorized as ___ expenses related to his business' marketing activities or ___ expenses incurred in managing the business.

Answer 1

Marketing expenses are administrative expenses because the are not directly tied to the production process, for example, it we talk about a car factory, a marketing expense is administrative because while marketing activities help raise sells, the marketing department did not directly participate in the making of the cars.

Expenses incurred in managing the business are also administrative expenses for the same reason stated above. An example of this expense is the wages paid to management or secretaries.