Question

Identify whether each of the following costs should be classified as product costs or period costs. (a) select a type of cost Manufacturing overhead. (b) select a type of cost Selling expenses. (c) select a type of cost Administrative expenses. (d) select a type of cost Advertising expenses. (e) select a type of cost Direct labor. (f) select a type of cost Direct materials.

Answer 1

The following costs are classified as product costs (manufacturing overhead, direct labor, and direct material) and period costs (selling expenses, administrative expenses, and advertising expenses).

What are product costs?

Product costs refer to the costs directly incurred for production.  They include:

1. Manufacturing overhead
2. Direct labor
3. Direct material

What are period costs?

Period costs are indirect costs that cannot be traced to production. Some of the period costs include:

1. Selling expenses
2. Administrative expense
3. Advertising expenses

Thus,  product costs include manufacturing overhead, direct labor, and direct material, while period costs include selling expenses, administrative expenses, and advertising expenses.

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