Question

When acturing products, direct labor and direct materials are classified as A) period costs and expensed when incurred 8) product costs and expensed when the goods are sold. C) period costs and expensed when the goods are sold. D) product costs and expensed when incurred

Answer 1

The correct answer is B) product costs and expensed when the goods are sold.

Step-by-step explanation:

When acturing products, direct labor and direct materials are classified as product costs and expensed when the goods are sold. As per accounting standard (IAS 2) these cost become part of inventory cost. These cost are balance sheet item untill sold. These costs are charged in profit and loss account when product is sold.