Question

What is a period cost and how does it differ from a product cost?

Answer 1

Period Cost:-

These are the costs,which are not assigned to the products but are charged as expenses against the revenue of the period in which they are incurred.All non-manufacturing costs such as general and administrative expenses,selling and distribution expenses are recognized as period costs.

​​Product Cost:-

These are the costs which are associated with the purchase and sale of goods(in case of merchandise inventory ).In the production scenario,such costs are associated with the acquisition and conversion of materials and all other manufacturing inputs into finished products fo sale.Hence,under marginal costing,variable manufacturing cost and under absorption costing, total manufacturing costs(variable and fixed) constitute inventoriable or product costs.

The difference between Product cost and period cost are as follows:-

Product Cost	Period Cost
It refers to those costs that are identified with the goods purchased or produced for resale.	It refers to those costs which are not assigned to the products but are charged as expense against revenue of the period in which they are incurred.
It is generally known as manufacturing costs or Inventoriable Cost.	It is generally known as non manufacturing costs.
Direct material ,Direct Labour,Direct expenses and other production overhead are the basic examples of under product Cost.	General Administration , marketing ,sales and distribution overhead are considered under period Cost.