• Administrative expenses are expenses incurred to operate a business, but not directly related to the production of a specific product or service.

  • Some level of administrative costs will always be incurred as a necessary part of operations.
  • Administrative expenses are often among the first to cut the budget, since they do not directly affect the company’s core business functions.
  • Management may allocate administrative costs to its business units based on a percentage of income, expenses, or other indicators.