When allocating costs, should you take time to figure out if the costs relate to materials or labor, or should you allocate all the costs as manufacturing overhead?
It is your first day on the job at a bicycle manufacturing company. Your first job is to determine the cost of a new line of bikes. After reviewing all the cost information, your boss says, “If you don’t know how to allocate a cost, just put it in manufacturing overhead. Whether it is a direct or indirect material, it will end up in the same place.” Do you agree with your boss? Why or why not?