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Questions and Answers
Which of the following best describes product costs?
Which of the following best describes product costs?
- Costs associated with marketing and selling products
- Costs expensed in the period they are incurred
- Costs assigned to inventory for resale (correct)
- Costs that do not affect the balance sheet
How are period costs treated in financial statements?
How are period costs treated in financial statements?
- They are capitalized and included in inventory until sold
- They are allocated across multiple accounting periods
- They are expensed in the same period they are incurred (correct)
- They are deferred costs that affect future revenues
What are expenses in the context of financial accounting?
What are expenses in the context of financial accounting?
- The consumption of assets to generate revenue (correct)
- The total amount spent on fixed assets
- Investments not yet realized
- The cost of goods manufactured
Which characteristic differentiates product costs from period costs?
Which characteristic differentiates product costs from period costs?
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Which of the following is NOT considered a product cost?
Which of the following is NOT considered a product cost?
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Study Notes
Product Costs
- Costs associated with inventory acquired for resale
- Also known as inventoriable costs
Period Costs
- Expenses incurred during the accounting period
- Are not included in the cost of inventory
Expenses
- Represent the consumption of assets to generate revenue
- Both product costs and period costs can be expenses
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