You have just been hired by EduRom Company, which was organized on January 2 of the current year. The company manufactures and sells a variety of educational DVDs for personal computers. It is your responsibility to supervise the employees who take orders from customers over the phone and to arrange for shipping orders via Federal Express, Canada Post, and other freight carriers.

The company is unsure how to classify your annual salary in its cost records. The company's cost analyst says that your salary should be classified as a selling expense; the controller says that it should be classified a manufacturing (product) cost; and the president says that it matters which way your salary cost is classified.

Required:

1 Which viewpoint is correct? Why?

2. From the point of view of the reported operating income for the year, is the president correct in saying that it matters which way your salary cost is classified? Explain.