You have just been hired by Ogden Company to fill a new position that was created in response to rapid growth in sales. It is you responsibility to coordinate shipments of finished 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 classify you 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.