Final answer:
Selling, general, and administrative expenses are considered period costs as they are not directly tied to the production of goods and are expensed in the period they are incurred. So the correct answer is option 2.
Step-by-step explanation:
Selling, general, and administrative expenses (SG&A) are classified as period costs rather than product costs. Unlike product costs, which are directly associated with the manufacturing of goods - such as raw materials and direct labor, period costs are not tied to the production process and instead are expensed in the period in which they are incurred.
SG&A includes costs such as sales personnel salaries, advertising expenses, and office rental. These costs are associated with the company's operations as a whole and do not directly contribute to the production of individual units of a product.
These costs are not directly associated with the production of goods or services. Instead, they are incurred to support the overall operations of the business over a specific period of time, such as a month or a year. Examples of selling, general, and admin expenses include salaries of salespeople, advertising expenses, and office rent