Question

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

Answer 1

Answer:

Product Costs: (a), (e) and (f).

Period Costs: (b), (c) and (d).

Explanation:

The difference between the two types of costs is that product costs are recorded within the inventory asset, since they affect the products. While the period costs are expenses that are recorded in the income statement without affecting inventory costs.

The product costs (Inventory Costs) are:

(a) Manufacturing overhead

(e) Direct labor

(f) Direct materials

The costs of the period (Expenses) are:

(b) Selling expenses.

(c) Administrative expenses

(d) Advertising expenses

Hope this helps!