Costs that are capitalized as inventory when they are incurred are called:
A) Fixed costs.
B) General costs.
C) Administrative costs.
D) Period costs.
E) Product costs.

Question

Quizplus · Accepted Answer

Costs that are capitalized as inventory when they are incurred are known as product costs. These costs are associated with the production of goods, and are considered an asset until the products are sold, at which point the costs are recognized as an expense in the cost of goods sold. Fixed costs, general costs, administrative costs, and period costs are types of expenses that are recognized immediately in the period they are incurred, and are not capitalized as inventory.

Costs That Are Capitalized as Inventory When They Are Incurred