Question

Direct Product Costs are charged against income in the time period

A. That the product is sold

B. That the product is paid for

C. That the product is purchased

D. That the product is manufactured

Answer 1

Correct Answer is Option C :That the product is purchased.

Reason:

Examples of product costs include the cost of raw materials, direct labor, and overhead. Before the products are sold, these costs are recorded in inventory accounts on the balance sheet. ... Period costs are always expensed on the income statement during the period in which they are incurred.

Thus The key difference between product costs and period costs is that product costs are only incurred if products are acquired or produced, and period costs are associated with the passage of time. Thus, a business that has no production or inventory purchasing activities will incur no product costs, but will still incur period costs.