Selling overhead
Selling overhead consists of indirect costs of generating sales, such as advertising, sales management and shared sales-office support. It is distinguished from production and distribution costs, although organisations may group selling and distribution in their reports. Some selling costs vary with activity, while others are committed or discretionary fixed costs. State the costing purpose before allocating them to products; selling overhead is normally excluded from production inventory.
Worked example
A monthly advertising campaign costs $6,000 for several products. It is a selling cost and may remain even if one product’s sales fall.
Common mistake
An allocated selling cost is not necessarily incremental or avoidable. Its treatment in a decision depends on what changes between alternatives.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |
