Question

Which of the following statements are true?

A. A factory supervisor's salary is a direct cost with respect to a unit of product.
B. A factory supervisor's salary is an indirect cost with respect to a unit of product.
C. A factory supervisor's salary is not relevant to product costing.
D. A factory supervisor's salary is a variable cost.

Answer 1

The correct statement is B, which identifies a factory supervisor's salary as an indirect cost with respect to a unit of product. This salary does not vary with the production level, and therefore, it is not a variable cost but is relevant to product costing.

Step-by-step explanation:

The statement B. A factory supervisor's salary is an indirect cost with respect to a unit of product is true. A factory supervisor's salary is considered an indirect cost because it does not directly associate with the production of a specific unit of product. Supervisors generally oversee the operations of the factory as a whole, meaning their cost is spread across all the units produced and is a part of overhead.

Variable costs, on the other hand, are costs that vary directly with the level of production. These typically include labor and raw materials. However, since a factory supervisor’s salary does not typically change with the number of units produced, it is not considered a variable cost. Thus, statement D is incorrect.

As for options A and C, a factory supervisor's salary is relevant to product costing as part of the overhead allocation but is not a direct cost per unit. Therefore, both of these statements are false.