Which of the following is NOT a product cost?

• A. Selling expenses
• B. Direct materials
• C. Direct labor
• D. Manufacturing overhead

Answer: (A)

Product costs are the costs tied to manufacturing a product and they become part of inventory until the product is sold. This group includes direct materials (the raw materials used to make the product), direct labor (the workers directly producing the product), and manufacturing overhead (indirect factory costs like utilities, depreciation on factory equipment, and indirect labor). Because these costs are tied to production, they sit on the balance sheet as inventory and later flow into cost of goods sold when the product is sold.

Selling expenses, in contrast, are period costs. They are not tied to the production process and are expensed in the period in which they are incurred. They do not become part of the product’s inventory or cost of goods sold.

So the item that is not a product cost is the selling expense.