Product Cost
The cost of making a product is called product cost. Product cost is also known as manufacturing cost.Product costs are taken for inventory valuation. Therefore, product costs are sometimes called the inventorial costs. Inventorial costs are all costs of a product that are regarded as assets when they are incurred and then become cost of good sold when the product is sold. If we define product costs differently, it affects the value of inventory and our profits differ. So, the understanding of product costs has a greater value from the perspective of inventory valuation and income reporting. Raw material cost is a precise example of product cost.
Period Cost
The costs that are indifferent to the level of production are period costs. Period costs do not change with the change in production volume. Rather, these costs are incurred either for sales activity or with the passage of time. Office and administrative department costs, and marketing department costs are good examples of period costs. Period costs are not taken for inventory valuation. All period costs are deducted from the revenues of the same period.
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The cost of making a product is called product cost. Product cost is also known as manufacturing cost.Product costs are taken for inventory valuation. Therefore, product costs are sometimes called the inventorial costs. Inventorial costs are all costs of a product that are regarded as assets when they are incurred and then become cost of good sold when the product is sold. If we define product costs differently, it affects the value of inventory and our profits differ. So, the understanding of product costs has a greater value from the perspective of inventory valuation and income reporting. Raw material cost is a precise example of product cost.
Period Cost
The costs that are indifferent to the level of production are period costs. Period costs do not change with the change in production volume. Rather, these costs are incurred either for sales activity or with the passage of time. Office and administrative department costs, and marketing department costs are good examples of period costs. Period costs are not taken for inventory valuation. All period costs are deducted from the revenues of the same period.
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