An exception to the general rule that costs should be charged to expense in the period incurred is
A)factory overhead costs incurred on a product manufactured but not sold during the current accounting period.
B)interest costs for financing of inventories that are routinely manufactured in large quantities on a repetitive basis.
C)general and administrative fixed costs incurred in connection with the purchase of
D)sales commission and salary costs incurred in connection with the sale of inventory.

Question

Quizplus · Accepted Answer

Factory overhead costs incurred on a product manufactured but not sold during the current accounting period should be recorded as inventory on the balance sheet rather than as an expense on the income statement. This is because the costs are related to a product that has not yet been sold and therefore cannot generate revenue to offset the costs. Once the product is sold, the costs are then charged to expense through cost of goods sold. This is known as the matching principle, which requires that expenses be recognized in the same period as the revenue they help generate.

An Exception to the General Rule That Costs Should Be