PRODUCT COSTING ✔ Product costing The term "product cost" refers to any expenses incurred by a business in producing its own goods or providing services to consumers. These expenses are recorded in the business' financial statements for the time period during which they are included in the price of the products it sells. EXAMPLES : 1. Direct material (DM) 2. Direct labor (DL) 3. Factory overheads (FOH) In order to produce a finished commodity (or service) that is ready for sale from raw materials, it is necessary to pay for the cost of raw material, labour, and factory overheads. According to GAAP and IFRS, product expenses must be capitalized as inventory in the balance sheet and should not be expensed in the profit and loss statements because such c...