Product costs are deducted from revenue
A)as expenditures are made.
B)when production is completed.
C)as goods are sold.
D)to minimize taxable income.

Question

Quizplus · Accepted Answer

Product costs are typically recorded as inventory until the products are sold. Once the products are sold, the cost of goods sold (including the product costs) is deducted from revenue in order to determine the gross profit. Therefore, product costs are deducted from revenue as goods are sold. Option A is incorrect because expenditures may include expenses that are not product costs, such as selling or administrative expenses. Option B is incorrect because production may not necessarily result in immediate sales. Option D is incorrect because product costs are deducted from revenue for financial reporting purposes, not just to minimize taxable income.

Product Costs Are Deducted from Revenue