Question

Which of the following is correct?

a. Selling costs are product costs.
b. Manufacturing overhead costs are product costs.
c. Interest costs for routine inventories are product costs.
d. All of these answers are correct.

Answer 1

The correct answer is that manufacturing overhead costs are product costs, which are those costs directly associated with manufacturing products, including indirect costs necessary for production.

Step-by-step explanation:

The correct answer is b. Manufacturing overhead costs are product costs. Product costs are those costs that are directly associated with the manufacturing of products. These include direct materials, direct labor, and manufacturing overhead, which encompasses indirect costs such as factory rent, utilities, and maintenance that are necessary to manufacture the products. Selling costs are considered period costs, not product costs, as they are incurred outside the production process. Furthermore, interest costs for routine inventories are considered period costs as well unless they are necessary to bring an asset to a condition and location ready for sale.