Product costs are all costs incurred in production of goods.
- It is used in the valuation of inventory.
Examples:
- Direct Materials (e.g., raw materials used in production)
- Direct Labor (e.g., wages of workers directly involved in production)
- Manufacturing Overheads (e.g., factory rent, machinery depreciation).
Period Cost
The cost which are not used in the valuation of inventory is called as period cost.
- It may be fixed and variable both.
Examples:
- Selling Expenses (e.g., advertising, sales commissions)
- Administrative Expenses (e.g., office salaries, legal fees).
