Accounting-Product vs. Period Costs
period costs
-Selling and Administrative costs. These costs are reported on the income statement as they are incurred. Not part of manufacturing overhead, not related to making the product. -Examples: Anything at corporate headquaters, anything related to selling the product, shipping costs, administrative salaries, executive salaries, administrative office expenses, sales commissions, advertising, research and development, etc. -Warehouse costs and people who move inventory are period costs -Selling Costs - all cost associated with marketing the finished products and getting the product to the customer -Administrative Costs - costs incurred for the general administration of the organization
product costs
-include all costs that are required to make a product -Product costs are: Direct Material, Direct Labor, Manufacturing Overhead -Are included as part of inventory and shown on the balance sheet until the product is sold. Product costs are often called "inventoriable costs" or "manufacturing costs".
period
a property tax at the corporate headquarters is
period
advertising expenses
period
anything related to corporate is a
indirect costs
costs that can not be easily and conveniently traced to a product. Manufacturing overhead and most period costs are indirect costs.
product
equipment maintenance at the factory
Product costs
include any materials that become part of the product, the cost of workers who touch the product to make it and all the costs of the facility and management required to make the product. The three major categories of product costs are: direct materials, direct labor and manufacturing overhead.
product
the cost of windows to a homebuilder would be
product
wages for those who pack individual products
period
wages of those who handle inventory
period
warehouse and inventory movement are
