Multiple Choice
Which stage of inventory includes goods that are ready to be sold to consumers?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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Which of the following is considered a product cost for a manufacturer?
A
Advertising expenses
B
Office salaries
C
Interest expense on loans
D
Direct materials used in production
Verified step by step guidance1
Understand the concept of product costs: Product costs are costs that are directly associated with the manufacturing of goods. These include direct materials, direct labor, and manufacturing overhead.
Differentiate product costs from period costs: Period costs, such as advertising expenses, office salaries, and interest expenses, are not directly tied to the production process and are expensed in the period they are incurred.
Identify direct materials as a product cost: Direct materials are raw materials that are directly used in the production of goods and can be traced to the finished product.
Recognize that advertising expenses, office salaries, and interest expenses are period costs: These costs are related to administrative, selling, or financing activities and are not part of the manufacturing process.
Conclude that direct materials used in production are considered a product cost for a manufacturer, as they are integral to the creation of the finished goods.
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