Asked by Ieshia Smith on Jun 26, 2024
Verified
Product costs are:
A) expended as they are incurred.
B) inventoriable costs.
C) period costs.
D) expended as they are incurred AND inventoriable costs.
Product Costs
Direct and indirect costs associated with producing a product, including materials, labor, and overhead expenses.
Inventoriable Costs
Costs associated with the purchase or production of goods that are considered assets when incurred and expensed as the goods are sold.
Period Costs
Expenses that are not directly tied to the production of goods and are instead allocated to the time period in which they are incurred.
- Discriminate between product costs and period costs concerning their application to manufacturing and non-manufacturing financial outlays.
- Understand the principles of cost allocation, particularly in the context of indirect materials, labor, and product costing.
Verified Answer
SP
saurav pathakJun 27, 2024
Final Answer :
B
Explanation :
Product costs are costs that can be directly attributed to the production of a final product or service. These costs are inventoriable costs because they are initially recorded as assets (e.g. raw materials, work-in-progress, finished goods) until the product is sold, at which point they are expensed as cost of goods sold. Product costs are not immediately expensed as they are incurred, and they are not considered period costs (which are expensed in the period incurred and not associated with production). Therefore, option B is the correct choice as it accurately defines product costs.
Learning Objectives
- Discriminate between product costs and period costs concerning their application to manufacturing and non-manufacturing financial outlays.
- Understand the principles of cost allocation, particularly in the context of indirect materials, labor, and product costing.