Organization Cost, Sales, General and Administrative Expenses and Management Cost

According to coase theory, there exists a cost of allocating resources by administrative power, that is, organization cost. Based on the comparison of organization cost with transaction cost, coase revealed why firms exist and also illustrated the change of firms´ scale. However, coase and his followers failed to detail the organization cost and its effects on firms. This study initiates from the introduction of organization cost and the importance to study it. Considering that the organization cost is hard to measure, further discussion about organization cost utilizes the concepts of accounting. Through the analysis of SG&A expenses, this paper recognizes the importance of SG&A expenses control and the difficulties to achieve such control. In order to counter the disadvantages of SG&A expenses, management cost is put forward, and the paper explores the literature on management cost.