GAAP for financial reporting requires that a manufacturer's inventory on the balance sheet and cost of goods sold on the income statement consist of: ________, the cost of direct labor, and the cost of manufacturing overhead.
A) the cost of direct materials
B) the cost of shipping
C) the cost of sales, general and administration (SG&A)
D) the expense of IT

Question

Quizplus · Accepted Answer

GAAP (Generally Accepted Accounting Principles) for financial reporting specifies that a manufacturer's inventory and cost of goods sold should include the cost of direct materials, the cost of direct labor, and the cost of manufacturing overhead. This is because these are the primary costs associated with producing goods.

GAAP for Financial Reporting Requires That a Manufacturer's Inventory on the Balance