Final answer:
Period costs represent all costs in an income statement besides cost of goods sold, which are expensed in the same period they are incurred and include sales and administrative expenses.
Step-by-step explanation:
Period costs are all costs in the income statement other than cost of goods sold. They are not the costs related to the manufacturing process but are instead sales and administrative expenses that are expensed in the period in which they are incurred.
In accounting, costs are divided into product costs and period costs. Product costs are all costs involved in acquiring or making a product and are included in the inventory value on the balance sheet until the products are sold, at which point they are expensed as cost of goods sold. In contrast, period costs are not included in the cost of goods sold but are expensed as incurred. These costs can include items such as rental expenses, salaries of sales personnel, and marketing expenses.
Total costs typically encompass both fixed costs, such as rent, which do not change with production levels, and variable costs, which are directly tied to the production volume. These costs together influence a firm's pricing and production decisions. However, in this context, period costs are specifically the non-manufacturing costs expensed on the income statement during a fiscal period.