Author Topic: Difference between product costs and period costs  (Read 788 times)

Offline Repon

  • Full Member
  • ***
  • Posts: 178
  • Test
    • View Profile
Difference between product costs and period costs
« on: July 09, 2015, 01:20:12 PM »
What is the difference between product costs and period costs?

A manufacturer's product costs are the direct materials, direct labor, and manufacturing overhead used in making its products. (Manufacturing overhead is also referred to as factory overhead, indirect manufacturing costs, and burden.) The product costs of direct materials, direct labor, and manufacturing overhead are also "inventoriable" costs, since these are the necessary costs of manufacturing the products.

Period costs are not a necessary part of the manufacturing process. As a result, period costs cannot be assigned to the products or to the cost of inventory. The period costs are usually associated with the selling function of the business or its general administration. The period costs are reported as expenses in the accounting period in which they 1) best match with revenues, 2) when they expire, or 3) in the current accounting period. In addition to the selling and general administrative expenses, most interest expense is a period expense.
Senior Lecturer in Accounting
Department of Business Administration
Faculty of Business & Economics
Daffodil International University

Offline asitrony

  • Hero Member
  • *****
  • Posts: 546
    • View Profile
Re: Difference between product costs and period costs
« Reply #1 on: July 10, 2015, 02:46:46 PM »
Very effective information.


Thanks for the post.

Asit Ghosh
Senior Lecturer, TE

Offline Jasia.bba

  • Full Member
  • ***
  • Posts: 151
  • Test
    • View Profile
Re: Difference between product costs and period costs
« Reply #2 on: July 12, 2015, 02:46:33 PM »
Wise.............
Jasia Mustafa
Lecturer,
Dept. of Business Administration
Faculty of Business & Entrepreneurship
Daffodil International University

Offline Jasia.bba

  • Full Member
  • ***
  • Posts: 151
  • Test
    • View Profile
Re: Difference between product costs and period costs
« Reply #3 on: July 12, 2015, 03:13:45 PM »
Nice..............
Jasia Mustafa
Lecturer,
Dept. of Business Administration
Faculty of Business & Entrepreneurship
Daffodil International University

Offline sajib

  • Full Member
  • ***
  • Posts: 179
    • View Profile
Re: Difference between product costs and period costs
« Reply #4 on: July 22, 2015, 09:52:35 AM »
What are Product Costs?

Costs incurred in the process of acquiring or manufacturing a product are considered product costs. Since these costs are often treated as inventory and do not appear on a company's income statement until the final product is sold, you may sometimes see these referred to as "inventoriable costs." A classic manufacturing firm has product costs consisting of materials used in the production process, or direct materials; labor expenses that are directly tied to manufacturing; and indirect costs such as manufacturing overhead. These are general concepts; the actual field of assigning costs to inventory can be very complex.

What are Period Costs?

All costs not included in product costs are called period costs. Since these costs are not involved in the production process, they are not treated differently on an income statement following a sale. Rather, they are treated as actual expenses in the period in which they arise, which is why they are called period costs.

According to U.S. generally accepted accounting principles, or GAAP, all selling and administrative costs are treated as period costs. Common examples of period costs include marketing expenses, rent, office depreciation and indirect labor. Even if physical inventories are composed of items that are treated as product costs, the actual administration of warehouses and inventory management expenses are considered period costs.

Read more: http://www.investopedia.com/ask/answers/102714/what-are-differences-between-period-costs-and-product-costs.asp#ixzz3gaZFZaLC
Follow us: @Investopedia on Twitter
Kamrul Hossain Sajib
Assistant Controller of Examination
Daffodil International University

Offline mostafiz.eee

  • Sr. Member
  • ****
  • Posts: 260
  • Test
    • View Profile
Re: Difference between product costs and period costs
« Reply #5 on: July 22, 2015, 11:19:48 AM »
Informative.

Offline Repon

  • Full Member
  • ***
  • Posts: 178
  • Test
    • View Profile
Re: Difference between product costs and period costs
« Reply #6 on: September 17, 2015, 01:18:04 PM »
Thanks all of you for nice comments and knowledge sharing.
Senior Lecturer in Accounting
Department of Business Administration
Faculty of Business & Economics
Daffodil International University

Offline silmi

  • Full Member
  • ***
  • Posts: 209
  • Test
    • View Profile
Re: Difference between product costs and period costs
« Reply #7 on: November 23, 2015, 01:26:33 PM »
Thanks for sharing..

Offline gour2010

  • Newbie
  • *
  • Posts: 42
    • View Profile
Re: Difference between product costs and period costs
« Reply #8 on: May 10, 2016, 10:27:33 AM »
Different one.......I mean out of the box