Distinguish between period cost and product cost.

Banking & FinanceManagementCompanies/Organisations

The major differences between period cost and product cost are as follows −

Period Cost

  • It’s the cost not allocated to any products and is charged as expenses.

  • It is also called as operating costs.

  • Time is the basic for period cost.

  • It contains only non-manufacturing cost.

  • It is recorded as expense in income statement.

  • It is not considered for valuation of inventory.

  • It is considered by valuation (cost inventory).

  • It includes Administrative cost, distribution cost etc.

  • It is not a part cost of production.

  • The cost is fixed.

  • Examples − audit fees, rent etc.

Product Cost

  • It is the cost allocated to products.

  • It is also called as inventorial cost.

  • The volume is basis for product cost.

  • It contains both manufacturing and non-manufacturing costs.

  • It is recorded as inventory in balance sheet and after sale cost of goods in income statement.

  • It includes manufacturing cost and is a part of cost of production.

  • It is a variable cost.

  • Examples − Raw material cost, inventory etc.

raja
Published on 27-Jul-2020 11:41:32
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