Explain the Meaning of Product Costs and Period Costs

question 112

Essay

Explain the meaning of product costs and period costs. Discuss which costs should be included in the cost of inventories.

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Definitions:

FOB Destination

A shipping term indicating that the seller bears the shipping costs and retains ownership of the goods until they are delivered to the buyer's location, at which point the buyer takes responsibility.

Ending Merchandise Inventory

Ending merchandise inventory is the value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting sold goods.

Perpetual Inventory System

An accounting method that continuously updates inventory records for purchases and sales in real-time.

Merchandise On Hand

The inventory of goods that a retailer has available for sale at any given time.