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Distinguish between period cost and product cost.
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.
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