Product costs are held as assets until sold, whereas period costs are expensed in the period in which they are incurred.

Question

Quizplus · Accepted Answer

Product costs, such as direct materials, direct labor, and manufacturing overhead, are capitalized as inventory on the balance sheet and expensed as cost of goods sold when the product is sold. Period costs, such as selling, general, and administrative expenses, are expensed in the period they are incurred because they are not directly tied to the production process.

Product Costs Are Held as Assets Until Sold, Whereas Period