In determining the cost of goods manufactured and thus the cost of the ending inventory:
A)A production supervisor's salary must be treated as a period cost (not added to production costs and inventory) because the salary is paid regardless of the amount produced.
B)The personnel department participates in hiring production workers, and therefore a portion of its costs must be allocated to production.
C)Property taxes on the factory building are treated as period costs because the same taxes are due regardless of the volume of production.
D)Only the costs of direct materials and direct labor must be capitalized.
E)None of the above is correct.

Question

Quizplus · Accepted Answer

The personnel department plays a role in hiring production workers, so a portion of its cost must be allocated to production. This cost includes recruitment, interviewing, and other employment-related expenses. The cost of goods manufactured includes all of the direct materials, direct labor, and manufacturing overhead costs incurred during the period in making products. All other costs are period costs and are charged to expense as incurred.

In Determining the Cost of Goods Manufactured and Thus the Cost