Question

Period costs a.are used to compute product cost. b.are selling costs and administrative costs. c.are carried in inventory until the goods are sold. d.can be included in overhead costs.

Answer 1

Answer:

b. are selling costs and administrative costs.

Explanation:

A period cost consists of cost that do not fall under the category of fixed assets, payments in advance, or inventory. It is not that related to transactional event but highly related to the passage of time. A period cost is therefore recorded in the income statement as part of the selling and administrative expenses.

Some of the examples of period costs are utilities, rent, office supplies, stationery, depreciation of office equipment and others which are categorized as selling costs and administrative expenses.