Question

Which of the following would not be classified as a product cost?

1) The cost of raw materials used in manufacturing the product
2) The cost of direct labor used to produce the product
3) The cost of shipping units of product to one of the company's customers
4) The cost of advertising the product to potential customers

Answer 1

Shipping costs for delivering products to customers are not classified as product costs, but instead as period costs. Product costs consist of raw materials, direct labor, and manufacturing overhead.

Step-by-step explanation:

In the context of product costs and cost behavior in businesses, certain costs are associated with the production of goods, while others pertain to selling and administrative aspects. Product costs typically include raw materials, direct labor, and manufacturing overhead. On the other hand, certain expenditures such as shipping costs, advertising, and research and development costs do not fall under the category of product costs; instead, they are classified as period costs, which are non-manufacturing costs that are expensed within the timeframe in which they are incurred. Therefore, the cost related to shipping units of product to a company's customers would not be classified as a product cost.