Any cost that does not flow to the income statement by way of a cascade of inventory accounts is recognized in the period incurred and is thus called a 'product cost'.

Question

Quizplus · Accepted Answer

This statement is incorrect. Product costs are costs that are directly associated with the creation or acquisition of a product, and they flow through the inventory accounts to the income statement as cost of goods sold. Costs that do not flow through the inventory accounts are generally classified as period costs and are recognized in the period incurred.

Any Cost That Does Not Flow to the Income Statement