Accounting-Product vs. Period Costs

-include all costs that are required to make a product -Product costs are: Direct Material, Direct Labor, Manufacturing Overhead -Are included as part of inventory and shown on the balance sheet until the product is sold. Product costs are often called "inventoriable costs" or "manufacturing costs".

-Selling and Administrative costs. These costs are reported on the income statement as they are incurred. Not part of manufacturing overhead, not related to making the product. -Examples: Anything at corporate headquaters, anything related to selling the product, shipping costs, administrative salaries, executive salaries, administrative office expenses, sales commissions, advertising, research and development, etc. -Warehouse costs and people who move inventory are period costs -Selling Costs - all cost associated with marketing the finished products and getting the product to the customer -Administrative Costs - costs incurred for the general administration of the organization

direct materials and direct labor

direct labor + manufacturing overhead (costs to take direct materials and covert them to a finished product).

costs that can be easily and conveniently traced to one product. Direct costs are direct materials and direct labor.

costs that can not be easily and conveniently traced to a product. Manufacturing overhead and most period costs are indirect costs.

direct materials, direct labor and manufacturing overhead.

- raw materials that become part of a finished product.

- workers that touch the product to make the product - also includes workers who operate the machine if the product is made by machine

-all costs of manufacturing the product except direct materials and direct labor *Costs associated with operating the factory that makes the product. If the cost has the word "factory", "plant", "manufacturing", as a descriptive word, the cost will be part of manufacturing overhead -Examples of manufacturing overhead costs are: - utilities at the plant such as electricity, water, phone. Support personnel at the plant such as an accountant, human resources or computer support. Training, maintenance and repairs, rent, insurance, taxes, etc. KEY - it has to happen at the manufacturing facility. Indirect labor and indirect material are part of manufacturing overhead.

Involved in making the product at the plant but do not touch the product to make it. example: salaries of the plant managers, supervisors, and quality inspectors

low cost materials that end up in the product or are used to make the product. Examples are glue, tape, screw, marking pens, etc. It is not easy to track exactly how much is used to make one product.

inventoriable costs

period cost and selling because they are costs incurred to make a sale and get the product to the customer. * selling costs are ALWAYS period costs.

administrative costs

it DEPENDS on which part of the company the costs are related to. the costs can be related to the cooperate office and administrative operations.

reported on the income statement as they are incurred.

manufacturing overhead.

direct labor.

manufacturing overhead.

manufacturing overhead.

product costs

period, administrative cost.

period costs.

product, direct materials.

period and administrative

period and warehouse

period and warehouse

period and selling

product and direct labor

product and MOH.

related to the organizations activities

related to selling the product.