There are a number of examples of inventoriable costs. The term inventoriable cost is sometimes considered synonymous with product costs. Product cost is a cost assigned to goods that were either purchased or manufactured for resale. The term inventoriable cost is used interchangeably with product cost because a product is stored as the cost of inventory until the goods are sold. These costs are included in work-in-process as well as finished goods inventory. Since service companies at least in theory have no assets for sale, they have no inventoriable costs. An example of an inventoriable cost is depreciation on a company's assembly equipment in a product manufacturer.
According to an accounting glossary published online on the Pearson Education website, inventoriable costs are a specific type of capitalized costs associated with the purchase of goods for resale. Inventoriable costs include costs associated with the acquisition and conversion of materials, and all other manufacturing inputs into goods for sale (Stock Related Costs, 2005). In other words, inventoriable costs are a pool of costs that consist of the cost of the beginning inventory in addition to the cost of goods purchased during the accounting period under review. These costs assigned to products become cost of goods sold when the product is sold. Inventoriable costs are an asset that becomes an expense when the goods are sold. The cost is considered to be an incurred cost when an asset is sold for the purpose of generating revenue.
For external reporting, a manufacturer's inventoriable product costs include raw materials as well as all other costs incurred in the manufacturing process. Inventoriable product costs include direct materials and direct labor, in addition to manufacturing overhead. Examples of overhead inventoriable product costs include the cost of utilities, as well as depreciation and insurance.
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