Question

Which of the following statements is incorrect with regard to product costs? A. Product costs flow from the balance sheet to the income statement. B. Unlike direct material and direct labor costs, overhead costs must be allocated to products. C. Product costs are expensed in the period incurred. D. Depreciation on manufacturing equipment is an indirect product cost.

Answer 1

Answer:

Product costs do not flow from the balance sheet to the income statement.

The correct answer is A.

Explanation:

Product costs flow from the income statement to the balance sheet.

Unlike direct material and direct labour cost, overhead cost must be allocated to products using a suitable basis.

Product costs are expensed in the period incurred in the income statement.

Depreciation on manufacturing equipment is an indirect product cost because it is not directly traceable to a cost unit or cost center.