Question

The salary of the assembly shop's supervisor falls under which cost classification?

a) Direct Labor Cost
b) Direct Materials Cost
c) Manufacturing Overhead Cost
d) Selling Cost
e) Administrative Cost

Answer 1

The assembly shop supervisor's salary is classified as c) Manufacturing Overhead Cost because it is an indirect cost associated with the production process and cannot be directly traced to specific products.

Step-by-step explanation:

Manufacturing overhead costs include all the indirect costs associated with the production process. These are costs that cannot be directly traced to the production of specific goods or services. The supervisor's salary is an indirect cost because the supervisor oversees the process rather than working directly on the product. Therefore, it is not classified as Direct Labor Cost or Direct Materials Cost, which are attributable directly to the manufacturing of goods. It also does not fall under Selling Cost or Administrative Cost as these pertain to the company's selling activities and general administration, respectively.