Question

When are product costs included on the income statement?

A. When direct materials are being consumed for manufacturing the product.
B. When the product is over 50% completed in the factory.
C. When the product is completed in the factory.
D. When the product is sold and delivered to a customer. None of the above

Answer 1

Answer:

The correct answer is D. When the product is sold and delivered to a customer.

Explanation:

It is recognized at the time of the sale, because the company receives an income as a result of the recovery of its cost plus the established profit margin. When the sale has not been made, it remains within the product inventories until the sale occurs and becomes an operational income.