Question

Why do you think that the CEO's salary is usually not listed as a product cost on the income statement?

Answer 1

Product cost is the one which includes direct material, direct labor and manufacturing overhead allocated for the particular product. These are costs which can be directly attributed to determine the cost of product. This costs become part of income statement as cost of goods sold. CEO’s salary is not included in product cost since his work is not related to particular product but overall operations of the company and we cannot take it as product costs but we include in income statement as selling and general administration expenses.