What is a product cost?

A product cost is defined as the costs that are directly associated with the production of goods, which include all expenses necessary to bring stock to a salable condition. This encompasses direct materials, direct labor, and manufacturing overhead incurred during the production process. The essence of a product cost is that it includes all costs that are tied to producing inventory, thereby allowing businesses to accurately calculate the cost of goods sold when inventory is sold.

Understanding this definition clarifies why the correct answer focuses on the costs required to prepare stock for sale. These costs must be capitalized as part of inventory on the balance sheet until the goods are sold, at which point they are expensed.

Other options would not fit the definition of a product cost. Costs associated with marketing stock fall under selling, general, and administrative expenses, which are not included in the product costs. A cost that is not directly related to inventory also does not contribute to bringing stock into a ready condition for sale and would be classified as a different type of expense. Similarly, the total selling price of stock is a revenue concept, not a cost concept, and does not pertain to the costs of bringing the product to market.