Final answer:
It is true that interest incurred while getting inventories ready for sale is a product cost, as these costs are necessary for bringing inventories to a saleable condition. In accounting, such interest expenses are capitalized as part of inventory costs, which align with the matching principle that pairs expenses with related revenue.
Step-by-step explanation:
The statement that 'Interest incurred while getting inventories ready for sale is a product cost' is true. This is because interest cost during the production period can be considered as part of the cost of producing the inventory. Such costs are necessary to bring the inventories to a saleable condition and location. In accounting, these costs are capitalized as part of inventory costs under the product costs and not expensed immediately.
Therefore, when a business incurs interest expense while it produces goods, this interest is allocated to the cost of those goods and is eventually expensed through the cost of goods sold when the goods are sold. This aligns with the matching principle in accounting, which states that expenses should be recognized in the period the related revenue is generated.
The treatment of interest as a product cost may vary with the type of inventories. For example, routine manufactured inventories may not capitalize interest costs unless the production period is extended. On the contrary, specific industries like manufacturing that require substantial time to prepare inventories may involve significant interest costs that are part of the product costs.