Wages paid to production supervisors would be classified as manufacturing overhead. Group of answer choices True False
The correct answer and explanation is:
Correct Answer: True
Explanation:
In cost accounting, manufacturing overhead refers to all indirect costs involved in the production process that cannot be directly traced to specific products. These costs include expenses related to operating the factory but not directly associated with the production labor or materials used in making a product.
Wages paid to production supervisors fall into this category. Here’s why:
1. Direct vs Indirect Labor:
- Direct labor is the labor of workers who are directly involved in the production of goods — for example, assembly line workers.
- Indirect labor, on the other hand, includes personnel who support the production process but do not physically work on the product. Production supervisors fall under this category because they oversee and coordinate the activities of the direct labor force, but they do not themselves transform raw materials into finished goods.
2. Manufacturing Overhead Definition:
Manufacturing overhead includes:
- Indirect labor (e.g., supervisors, maintenance staff)
- Indirect materials (e.g., lubricants, cleaning supplies)
- Utilities for the factory (e.g., electricity, water)
- Depreciation on factory equipment
- Factory rent and property taxes
Since production supervisors’ wages cannot be directly attributed to a specific unit of product but are necessary for the production process to function efficiently, their wages are appropriately classified as part of manufacturing overhead.
3. Why It Matters:
Correctly classifying production supervisor wages ensures accurate cost accounting, which is vital for:
- Setting appropriate product prices
- Managing and controlling production costs
- Preparing financial statements that reflect the true cost of goods manufactured
Conclusion:
Wages paid to production supervisors are not direct labor costs, but they are still part of the manufacturing process. Therefore, they are correctly classified as manufacturing overhead. So, the correct answer is True.