Utah Contractor Practice Exam

The combination of Selling Expenses and Administrative Expenses is referred to as:

1. General expenses

2. Operating expenses

3. Total expenses

4. All of the above

The correct answer is: Operating expenses

The combination of Selling Expenses and Administrative Expenses is referred to as Operating Expenses because these costs are directly related to the core operations of a business. Operating Expenses encompass all the costs incurred while running the business on a day-to-day basis, excluding the costs of goods sold. This includes costs such as salaries for administrative personnel, rent for office space, utilities, and other expenses associated with selling goods or services. Understanding Operating Expenses is crucial for evaluating the efficiency and profitability of a business; they are essential in determining net income on the income statement. While General Expenses might also be considered part of this total, they are typically a broader category and may not exclusively refer to the combination of Selling and Administrative Expenses. Total Expenses would include all costs, not just operating, thus making Operating Expenses the most accurate term for the combination mentioned. The option that includes "All of the above" does not distinctly identify the combination of Selling and Administrative Expenses, as it suggests everything listed, which may lead to ambiguity.