Question

What is the difference between a product cost and a period cost? Give three examples of each. a) Product cost is incurred for goods produced, while period cost is incurred for a specific time period.

b) Product cost relates to operating expenses, while period cost involves manufacturing expenses.
c) Product cost is directly associated with manufacturing, while period cost is linked to administrative activities.
d) Product cost refers to ongoing expenses, while period cost covers one-time expenditures.

Answer 1

Product cost refers to costs incurred for goods produced, while period cost is incurred for a specific time period. Examples of product costs include raw materials, factory wages, and equipment. Examples of period costs include rent, salaries, and marketing expenses.

Step-by-step explanation:

Product cost refers to the costs that are directly associated with producing goods, such as direct materials, direct labor, and manufacturing overhead. These costs are incurred for goods that are produced and become a part of the finished product. Examples of product costs include raw materials used in manufacturing, wages paid to factory workers, and the cost of equipment used in production.

On the other hand, period costs are incurred for a specific time period and are not directly associated with the production of goods. These costs are often considered operating expenses and are expensed in the period in which they are incurred. Examples of period costs include rent for office space, salaries of administrative staff, and marketing expenses that promote the company's products.