As part of the annual audit you notice that "Indirect labor salaries" included the $20,000 salary paid to Ken, who actually works in the advertising department of the company.Does this seem reasonable? What incentive would management have to include the advertising costs as "indirect labor"? (That is, what would their motivation be to do this?)Could this have any impact on the operating income? Explain.

By including this selling expense as a manufacturing cost, income might be overstated as, if units were unsold, part of this $20,000 salary would wind up being held in inventory, either as WIP or finished goods, rather than being deducted from income in its entirety as a selling expense.