How do you classify costs based on inventoriability?


Among all the costs recognized and accumulated, some of them can be assigned (traced or allocated) to specific products while other costs are too remote from products for the assignment to be meaningful. Besides, among all the costs which can be assigned to products, some can “follow” these products in the inventory, while others have to be expended in the income statement as soon as they are incurred. The next subsection introduces precise vocabulary to differentiate between all the meanings of the term “product cost” and help you sort these different kinds of costs out.