Question

________ all costs of a product that GAAP requires companies to treat as an asset for external financial reporting. These costs are recorded as an asset​ (inventory) on the balance sheet until the asset is sold. The cost is then transferred to an expense account ​(Cost of Goods Sold​) on the income statement.

Answer 1

Product costs are.

Step-by-step explanation:

Often the information needed by internal managers stands in sharp contrast to external reporting requirements promulgated by Generally Accepted Accounting Principles (GAAP).

GAAP requires full costing and management decision making requires incremental information.

According to GAAP, all manufacturing costs must be treated as product costs, and all selling and administrative costs must be treated as period costs.

Material cost + labor costs incurred directly in producing the product + other production or indirect production overhead costs.

If the products are in inventory, the costs are recorded as assets. If they have been sell, the are recorded as costs of goods sold.