Final answer:
Product costs are expensed as cost of goods sold when the final product is sold, not when they are transferred to the Work-in-Process Inventory. This follows the matching principle of accounting. Costs include explicit costs, like wages and rent, and implicit costs, such as opportunity costs and depreciation.
Step-by-step explanation:
The student's question pertains to when product costs are expensed in the context of accounting and manufacturing. Contrary to choice 'c' in the question, product costs are not expensed when products are transferred to the Work-in-Process Inventory account; instead, product costs are treated as expenses in the form of cost of goods sold (COGS) at the point when the final product is sold. Before this point, costs are recorded as part of inventory on the balance sheet and are not expensed. This is in line with the matching principle in accounting, which states that expenses should be recorded in the period in which they help generate revenues.
Looking at types of costs, we can differentiate between explicit and implicit costs. Explicit costs are direct, out-of-pocket expenditures such as wages and rent. Implicit costs are the indirect costs including opportunity costs of using the firm's resources or their depreciation. The costs of inputs and the associated factor payments (e.g., wages and salaries for labor) are accumulated to determine the cost of production for a given quantity of output, which then becomes part of the COGS once the goods are sold.