product costs (inventory)
Product costs are the costs directly associated with the acquisition of goods and the conversion of such goods to a salable condition. Such charges would include purchases, freight charges on goods purchased, other direct costs of acquisition, labor, and other production costs incurred in processing the goods up to the time of sale. Manufacturing overhead costs are also allocated to inventory. Manufacturing overhead costs include indirect material, indirect labor, and such items as depreciation, taxes, insurance, heat, and electricity incurred in the manufacturing process. Selling, administrative and interest costs are generally not included as inventory costs; they are period costs and thereby charged to expense in the period incurred.