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Salary costs for new position: product cost, selling expense

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You have just been hired by Corporation to fill a new position that was created in response to the upcoming launch of a newly developed product. It is your responsibility to design an advertising campaign for this product's debut in Mexico and Central America.

The company is unsure how to classify your annual salary in its cost records. The company's cost analyst says that your salary should be classified as a manufacturing (product) cost; the controller says that it should be classified as a selling expense; and the president says that it doesn't matter which way your salary cost is classified.

1. Which viewpoint is correct? Why?
2. From the point of view of the reported net operating income for the year, is the president correct in his statement that it doesn't matter which way your salary cost is classified? Explain?

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Solution Summary

The solution examines the salary costs for a new position. The product cost and selling expense is determined.

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1.

The Controller's view is correct. The hiring is made for the purpose of designing an advertising campaign for a newly developed product of the company. It is in connection with the sale ...

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