An EXCEPTION to the general rule that costs should be charged to expense in the period incurred is
A) factory overhead costs incurred on a product manufactured but not sold during the current accounting period.
B) interest costs for financing of inventories that are routinely manufactured in large quantities on a repetitive basis.
C) general and administrative fixed costs incurred in connection with the purchase of inventory.
D) sales commission and salary costs incurred in connection with the sale of inventory.

Question

Quizplus · Accepted Answer

Factory overhead costs incurred on a product manufactured but not sold during the current accounting period qualify as work in process (WIP) inventory and should be carried forward as inventory until the related product is sold. This exception is based on the matching principle, which requires costs to be recognized when the related revenue is recognized. In this case, the revenue recognition occurs when the product is sold, not when it is manufactured.

An EXCEPTION to the General Rule That Costs Should Be