Question

A plant manager's salary is:

A) a direct cost and an indirect cost

B) a direct cost

C) an indirect cost

D)a period cost

Answer 1

Concepts and reason

Plant manager’s salary: Plant manager is the employee of the company who looks after the entire manufacturing process of the company and supervises the production. The company pays salary to the plant manager for services provided by him to the company. The plant manager’s salary is part of the manufacturing overhead of the company.

Fundamentals

Period costs: Period costs are the costs another production costs. These costs include administrative and selling costs that are not incurred to produce the goods. The period costs could be variable or fixed costs.

Direct costs: Direct costs are the costs directly related to the production of goods and are incurred since the goods are produced and if company does not produce the goods then these costs can be avoided.

Indirect manufacturing costs: Indirect manufacturing costs are the cost incurred for manufacturing the product which are not directly related to the product but are required so as to complete the production of goods.

Period costs are the office and selling expenses of the business and plant manager’s salary is incurred for manufacturing purpose as the plant manager looks after the manufacturing process and so plant manager’s salary is therefore manufacturing overhead.

Thus, plant manager’s salary is not period costs.

Direct costs are the costs directly related to produce the goods and would include the direct material costs and direct labor costs. The plant manager’s salary does not relate directly to the production of goods as the goods are produced with the help of direct materials and direct labor and without these costs the goods cannot be produced.

Thus, plant manager’s salary is not direct cost but an indirect costs of production.

Ans:

Plant manager’s salary is indirect costs of production.