Question

Which of the following is also known as an inventoriable cost, because such costs go into the WIP inventory account and then into the finished goods inventory account before appearing on the income statement as part of COGS?

A) Variable costs
B) Fixed costs
C) Direct costs
D) Indirect costs

Answer 1

Direct costs are inventoriable costs that move through WIP and finished goods inventory accounts and are ultimately reflected in COGS on the income statement.

Step-by-step explanation:

Costs in business can be categorized into fixed costs and variable costs. The type of cost that is also known as an inventoriable cost, which goes into the Work-in-Process (WIP) inventory account and then into the finished goods inventory account before appearing on the income statement as part of the Cost of Goods Sold (COGS), is C) Direct costs. Direct costs, like raw materials and direct labor, are specifically associated with the production of goods and can be directly traced to the production process, increasing as the level of production increases.