Final answer:
Period costs refer to the non-manufacturing expenses incurred by a business such as selling, delivery, and customer support. These are considered indirect costs of doing business, rather than direct costs associated with production. Understanding the distinction between fixed and variable costs, as well as the various cost patterns among industries, is vital in analyzing a firm's expenses. Correct option is c.
Step-by-step explanation:
The concept of period costs pertains to expenses incurred by a business not directly tied to the production process. Responding to the query, period costs: C) include the cost of selling, delivering, and after-sales support for customers and D) should be treated as an indirect cost rather than as a direct manufacturing cost. These costs do not vary with production levels and encompass all non-manufacturing expenses that a business incurs, such as sales commissions, advertising expenses, and executive salaries.
Considering the short-run perspective on total costs in firms, we understand that costs are divided into fixed costs and variable costs. Fixed costs, also known as sunk costs, are incurred before any output is produced and do not vary with production levels. Variable costs, on the other hand, are associated with the act of producing and can lead to diminishing marginal returns as production increases.
The pattern of costs can vary greatly among industries. For example, a company that operates online, providing services such as medical advice, might have high initial fixed costs. But once operational, the marginal costs remain low until a certain threshold of service quantity is met. Conversely, businesses with physical tasks such as snow shoveling have low fixed costs but may experience sharp increases in marginal costs if they expand beyond their equipment or staff capacity.