CPIM Practice Exam

What category of expenses on an income statement includes costs such as salaries for general managers and research and development?

1. Manufacturing expenses

2. General and administrative expenses

3. Operational expenses

4. Sales and marketing expenses

The correct answer is: General and administrative expenses

The correct answer is the category of expenses referred to as general and administrative expenses. This category encompasses costs that are necessary for the overall operation of a company but are not directly tied to specific production or sales activities. General and administrative expenses include salaries and benefits for high-level management, such as general managers, as well as costs associated with research and development, which are crucial for fostering innovation and improving products or services. While manufacturing expenses typically relate to costs incurred directly in the production of goods, and sales and marketing expenses focus on promoting and selling products, general and administrative expenses cover the broader organizational overhead. Operational expenses is a more encompassing term that might integrate various categories, but specifically isolating the costs that pertain to management and R&D activities would correctly place them in the general and administrative expenses category, highlighting their importance to the business’s strategic functions.