Why would changing period costs to product costs increse a period's reprted earnings?

Question

I dont get it. Does it not appear on the income statment or something?
Would it really be considered unethical?
They could both be considered expenses nontheless right?

Answer 1

You have the right general idea. It's only a matter of timing, you see. If you charge a period cost into a product cost and that product is not sold this period, the cost gets carried forward to the next financial year as part of the value of inventory. When the product is finally sold, the product cost is released into the income statement as Cost of Goods Sold. So you only succeed in delaying its entry into the income statement. If the product was sold immediately, it would have made no difference to the bottom line, only the description and presentation, the difference between the cost being disclosed as COGS or Selling, General & Admin expenses.