Explain Why You Need To Understand The Definitions Of Period Costs
ACC 154
December 07, 2011
Extra credit 1. To understand the reason, you need to understand the definitions of period costs and product costs. Period costs are not a necessary part of the manufacturing process. Rather they are costs associated with the selling part of the business or its administrative overhead. These costs are expensed in the period in which they occur. Product costs are the direct materials, direct labor and overhead associated with making the company's product. If a unit is not sold, these costs are reported as part of the company's inventory and are reported on the Balance Sheet as a current asset. Reclassifying from period to product costs moves the costs from being an expense on the Income Statement to being part
December 07, 2011
Extra credit 1. To understand the reason, you need to understand the definitions of period costs and product costs. Period costs are not a necessary part of the manufacturing process. Rather they are costs associated with the selling part of the business or its administrative overhead. These costs are expensed in the period in which they occur. Product costs are the direct materials, direct labor and overhead associated with making the company's product. If a unit is not sold, these costs are reported as part of the company's inventory and are reported on the Balance Sheet as a current asset. Reclassifying from period to product costs moves the costs from being an expense on the Income Statement to being part