Final answer:
Period costs are expensed in the period the related service or activity occurs, and they consist of selling, general, and administrative expenses not tied to manufacturing. These costs represent consumer expenditure for goods or services and are part of company operating expenses.
Step-by-step explanation:
Period costs are always expensed on the income statement in the period in which the related service or administrative function takes place, rather than being capitalized into inventory. When individuals or organizations purchase goods or services from firms, this is considered to be consumer expenditure because they are consuming those goods or services, and the money paid for each is an expense.
Unlike product costs, which are associated with the manufacturing of goods and are included in the cost of goods sold, period costs are non-manufacturing costs and are not tied to inventory. They are essentially the expenses associated with operating the business that are not directly tied to the manufacturing process. Common examples of period costs include selling, general, and administrative expenses (SG&A), which are recorded in the period incurred regardless of when the related products are sold.