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Cost Behavior-Product Versus Period Cost(Part3)

Before managers can focus on making any decision making, one of the crucial element is the need to under the various cost behavior. The following are discussed:

Variable, Fixed & Mixed Costs(Part1) 

Direct Versus Indirect Costs(Part2)

PRODUCT VERSUS PERIOD COSTS(PART3)

How Are Costs Being Classified(Part4)

Here in this Part 3 the difference between Product and Period Costs are explained.

Product costs:

Those costs that are identified with goods purchased or produced for resale. In manufacturing firm, these costs are attached to the product and included in stock valuation for finished goods or work-in-progress, until they are sold.

Period costs:

Those costs that are identified with a SPECIFIC TIME INTERVAL and not inventoried. They are charged to the period as another form of matching expenses with revenue.

Salient Point:

In a manufacturing concern, all manufacturing costs are regarded as product costs and non-manufacturing costs as period costs.

This entry was posted on Wednesday, October 17th, 2007 at 6:10 am and is filed under 1. Costs Behaviour. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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