A merchandising business paid $2,500 to purchase inventory and $50 to have the inventory delivered to its customers. Its product costs were $2,550.
Answer the following statement true (T) or false (F)
False
The $2,500 paid to purchase inventory would be considered a midstream costs in a merchandising company and, as such, it would be classified as a product cost. Downstream costs are costs incurred after the manufacturing process including marketing, distribution, and customer services. Distribution costs, which include the product delivery costs of $50 in this situation, are classified as general, selling, and administrative expenses and are expensed in the period they are incurred.
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