Under GAAP, costs of manufacturing products are considered part of inventory until the items are sold or disposed of.

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GAAP (Generally Accepted Accounting Principles) requires that costs of manufacturing products (direct materials, direct labor, and manufacturing overhead) be considered part of inventory until the items are sold or disposed of. This means that these costs are recognized as expenses (cost of goods sold) only when the inventory is sold.

Under GAAP, Costs of Manufacturing Products Are Considered Part of Inventory