Final answer:
SG&A refers to Selling, General, and Administrative expenses, which encompass a wide range of costs like sales personnel salaries, advertising, office rent, utilities, and managerial salaries. These are not directly tied to production but are necessary for running the business.
Step-by-step explanation:
SG&A stands for Selling, General, and Administrative expenses. These are the costs not directly tied to the production of goods or services. Typically, SG&A includes expenses such as salaries and commissions for sales personnel, advertising and promotional materials, rent for office space, utilities, and office supplies. Additionally, SG&A includes costs related to the general management and administration of a business, such as executive salaries, legal fees, accounting costs, and other administrative salaries.
For example, let us consider a company that pays for advertisements in order to promote its products. The cost of these advertisements would be considered an SG&A expense since it is related to sales activities. Similarly, the salary of the office manager who does not work directly in producing the goods or services but rather in managing office operations is also part of SG&A.