1. Explain why product costs are capitalized but period costs are expensed in the current accounting period.
2. Explain how business activities and inventories for a manufacturing company, a merchandising company, and a service company differ.
3. Distinguish between direct labor and indirect labor.
4. Distinguish between (a) factory overhead and (b) selling and administrative overhead.
5. Distinguish between direct material and indirect material.
6. What product cost is both a prime cost and a conversion cost?