For Manufacturing Companies labor is often split between 'Cost of Sales' (COS) and 'Selling, General and Administrative" (SG&A) expense lines on the income statement. If the labor is directly or indirectly related to manufacturing it would flow through inventory and then Cost of Sales, however for support staff such as accountants, it would be considered SG&A.
My question surrounds vacation accruals. If an employee who's typical labor is charged to COS, then would the vacation accrual expense also flow through COS.
I'm certain that an employee, who's labor is charged to SG&A, vacation accrual would also be charged to SG&A.
The issue is whether or not the COS employee's vacation time should really be capitalized as inventory (through direct labor) and then expensed through COS.
Any advice would be greatly appreciated.
My question surrounds vacation accruals. If an employee who's typical labor is charged to COS, then would the vacation accrual expense also flow through COS.
I'm certain that an employee, who's labor is charged to SG&A, vacation accrual would also be charged to SG&A.
The issue is whether or not the COS employee's vacation time should really be capitalized as inventory (through direct labor) and then expensed through COS.
Any advice would be greatly appreciated.