Indirect costs incurred in a manufacturing environment that cannot be traced directly to a product are treated as
A) period costs and expensed when incurred
B) product costs and expensed when the goods are sold
C) product costs and expensed when incurred
D) period costs and expensed when the goods are sold

Question

Quizplus · Accepted Answer

Indirect costs in a manufacturing environment that cannot be directly traced to a product are treated as product costs. These costs are allocated to the cost of goods sold and are expensed when the goods are sold, not when the costs are incurred. This approach aligns the cost recognition with the revenue generated from selling the goods, adhering to the matching principle in accounting.

Indirect Costs Incurred in a Manufacturing Environment That Cannot Be