In accounting, which costs fall under the category of Product Costs?

Product costs are those costs that are directly associated with the manufacturing of goods. This category includes various expenses that can be attributed directly to the production process. These costs encompass direct materials, direct labor, and manufacturing overhead.

When considering why the selection indicative of costs that can be directly traced to products sold is the right choice, it's crucial to emphasize that these costs contribute to the creation of inventory. This means that they are incurred during the production phase and are eventually assigned to the cost of goods sold when the products are sold.

Choices that mention only raw materials costs or administrative expenses do not encompass the full range of product costs, potentially overlooking the entire picture required for proper accounting. Raw materials are indeed a component of product costs, but they are not the only factor; labor and overhead costs also play significant roles. Furthermore, administrative expenses and transportation costs that are unrelated to production fall outside the realm of product costs, as they are not directly attributable to the manufacturing process or essential for the creation of a finished product. This ensures that the definition of product costs is broad enough to include all costs necessary for production.