Question

How are manufacturing costs reported in the financial statements?How are period costs reported in the financial statements?

Answer 1

Hi,

Answer:

Manufacturing cost are the cost that are incurred for the manufacturing of particular product and which can be directly charged to product such as, prime cost, indirect cost ie, overheads. So these cost will be treated as cost of goods sold and it will shown in income statement as 'cost of good sold'.(ie, it is considered as direct cost in income in income statement)  

It is deducted from sales revenue to arrive gross profit.

Period Cost:

Period cost are those cost which cannot be assigned to a particular produc, thats why it is not included in cost of sales and can be treated as expense of the respective period. Such as Selling and distribution expense, Packing expense etc.

So it will comes under indirect expense in income statement (ie, reduced from Gross profit)

Note: I think your doubt regarding the topic is solved. If you have any doubt kindly please clear the same.