Direct labor and direct materials are classified as:
A) product costs and expensed when the goods are sold
B) product costs and expensed when incurred
C) period costs and expensed when incurred
D) period costs and expensed when the goods are sold

Question

Quizplus · Accepted Answer

Direct labor and direct materials are both components of manufacturing or production costs and are classified as product costs. These costs are treated as inventory until the goods are sold, at which point they are expensed as Cost of Goods Sold. Therefore, choice A is correct as product costs are expensed when the goods are sold.

Direct Labor and Direct Materials Are Classified As