Product Cost

Product cost is the cost of inventory on hand, also called inventurable cost. They are assets until the products are sold. Once sold, it becomes an expense, i.e. Cost of Goods Sold (COGS). All manufacturing costs are product costs, for example, direct materials, direct labor, and factory overhead.

Product cost is the cost of inventory (inventoriable cost) that becomes an expense as cost of goods sold when the product is sold.

- Used in product/service costing, budgeting, and variance analysis.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.

- Example: The costing team uses **Product Cost** to allocate costs and analyze margins by product line.

- Why it matters: Improves cost accuracy, supports better pricing and budgeting, and strengthens performance measurement.