2-17.) You have just been hired by Ogden Company to fill a new position that was

Question

2-17.) You have just been hired by Ogden Company to fill a new position that was creaqted in response to rapid growth in sales. It is your responsibility to coordinate shipments of finsihed goods from the factory to distribution warehouses located in various parts of the United States so that goods will be available as orders are received from customers. The company is unsure how to clasify yo9ur annual salary in its cost records. The company's cost analyst says that your salary should be classified as a manyfacturing(product) cost; the controller says that it should by classified as a selling expense; and the president says that it doen'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.

Explanation / Answer

1. The controller view is correct, because the salary is being paid to take care of shipments of finished goods from the factory to distribution ware houses. So this salary should be treated as selling expenses only. 2.As per the presidents view, though there is no difference in the net operating income, the salary should be treated as selling expenses only,as said by the controller and not as manufacturing expenses, because the total manufactruing cost will show high.

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