When manufacturing products, direct labor and direct materials are classified as
A)period costs and expensed when incurred.
B)product costs and expensed when the goods are sold.
C)product costs and expensed when incurred.
D)period costs and expensed when the goods are sold.

Question

Quizplus · Accepted Answer

Direct labor and direct materials are considered product costs because they are directly attributable to the production of goods. These costs are capitalized as part of the inventory value and only expensed as cost of goods sold when the finished goods are sold.

When Manufacturing Products, Direct Labor and Direct Materials Are Classified