Question

Jack performs maintenance on the manufacturing machinery, and Charlie performs maintenance on the office computers. Would their salaries be classified differently? A : Yes, Jack’s salary would be classified as direct labor, whereas Charlie’s salary would be classified as indirect labor. B : Yes, Jack’s salary would be classified as a product cost, whereas Charlie’s salary would be classified as a period cost. C : No, both salaries would be classified as indirect labor. D : No, both salaries would be classified as a product cost.

Answer 1

Answer:

B : Yes, Jack’s salary would be classified as a product cost, whereas Charlie’s salary would be classified as a period cost.

Explanation:

In determining the product cost, Jack's salary which forms part of the manufacturing overhead will be included in the total manufacturing costs whereas Charlie's salary will be regarded as a period cost.  This makes option B the correct choice.  The maintenance costs on manufacturing machinery and office computers are classified differently in a manufacturing setting because Jack's maintenance affects manufacturing indirectly while Charlie's maintenance affects the office administration directly.