Which of the following terms accurately describes all three manufacturing costs (i.e. direct materials, direct labour and manufacturing overhead)?
A) Product costs
B) Variable costs
C) Direct costs
D) Both direct costs and product costs

Question

Quizplus · Accepted Answer

Product costs include all costs involved in acquiring or making a product, which encompasses direct materials, direct labor, and manufacturing overhead. These costs are capitalized as inventory on the balance sheet until the goods are sold, at which point they are expensed as the cost of goods sold. Variable costs and direct costs do not accurately describe all three manufacturing costs because not all manufacturing overhead costs are variable or direct.

Which of the Following Terms Accurately Describes All Three Manufacturing