ACCA Applied Knowledge · Management Accounting · Cost classification
A manufacturing company pays the salary of its factory production supervisor. In a cost statement classified by function, under which heading would this cost be reported?
The factory production supervisor's salary is a production cost. Classification by function groups costs by the activity they support, and supervising factory output is part of the manufacturing function rather than administration, selling or finance.
- AProduction costCorrect
- BAdministration cost
- CSelling and distribution cost
- DFinance cost
Explanation
A factory supervisor's salary relates to running the production process, so it is classified as a production (manufacturing) cost by function. Administration cost would apply only to general office management salaries, which this is not.
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