Selling and Administrative expenses are never included in product costs.

Question

BlackTom AI · Accepted Answer

Product costs include direct materials, direct labor, and manufacturing (factory) overhead; selling and administrative expenses are treated as period costs and expensed in the period incurred.

1) Relevant knowledge points and concepts
- Product costs (inventoriable costs): costs necessary to manufacture or purchase goods for resale — direct materials, direct labor, and manufacturing overhead. Under both GAAP and IFRS these costs are capitalized as inventory and expensed as cost of goods sold when inventory is sold. 
- Period costs: costs not tied to production; include selling expenses (advertising, sales commissions, freight-out) and administrative expenses (office salaries, corporate expenses). These are expensed immediately in the period incurred on the income statement.
- Distinction examples: freight-in (cost to bring purchases to the factory) is included in product cost; freight-out (delivery to customers) is a selling expense and a period cost.

2) Step-by-step reasoning
- Step 1: Identify what counts as a product cost — factory-related costs only. 
- Step 2: Examine selling and administrative expenses — they relate to marketing, distribution, and corporate management, not to the production process. 
- Step 3: Since product costs must be inventoriable and capitalized, and selling/administrative costs are expensed as period costs, they cannot be included in product costs.

3) Intermediate classification steps (examples)
- Direct materials used in production → product cost.
- Factory supervisor salary → manufacturing overhead → product cost.
- Sales commission on goods sold → selling expense → period cost (not product cost).

4) Why the correct answer is correct
Because accounting standards consistently classify selling and administrative expenses as period costs, they are not capitalized as part of inventory or cost of goods sold and thus are never included in product costs.

5) Why the other option is incorrect
Saying False would imply that selling or administrative expenses can be product costs; this contradicts standard cost classification. While certain costs related to acquisition (e.g., freight‑in) are product costs, those are not selling/administrative expenses.

Conclusion: The correct answer is True, which matches the provided answer.

Selling and Administrative expenses are never included in product costs.单项选择题

类似问题

EA 4 - Which of these costs are product costs? Select all that apply.

Inventoriable costs is another term for costs.

Which ONE of the following thalamic nuclei is targeted by the trigeminothalamic tract?

Which ONE of the following is disinhibited in the direct pathway of the basal ganglia motor loop

30. What is the main purpose of the lecture?

Section FChoose a, b or c as the best answer.29. Which statement is the speaker most likely to agree with?

28. 15-minute neighbourhoods provide residents with inexpensive ____ .

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单