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Inventoriable Costs

See Also:
Just in Time Inventory System
Perpetual Inventory System
Inventory Turnover Ratio Analysis
Days Inventory Outstanding
LIFO vs FIFO

Inventoriable Costs¶

In accounting, inventoriable costs refer to all costs incurred to obtain or produce the end-products. Inventoriable costs are costs that are applied to the products the company produces and sells. Examples of inventoriable costs include the cost of raw materials, direct labor, and part of overhead.

Before the products are sold, these costs are recorded in inventory accounts on the balance sheet. They are treated like assets. Inventoriable costs are sometimes referred to as product costs. When the products are sold, these costs are expensed as costs of goods sold on the income statement.

In sum, inventoriable costs are inventoried on the balance sheet before being expensed on the income statement. Inventoriable costs, or product costs, are in contrast to period costs, which are not directly linked to production and are expensed in the period in which they are incurred.