Here's a list of some common types of period costs that a business may have: Related: What Is Applied Overhead? Definition and Examples What are some common period costs? Predetermined expenses: Predetermined expenses are costs that companies estimate for a future period calculated to prepare the budget, which the company considers while making decisions. Historical expense: Historical expenses are costs already incurred in the previous period, which the company doesn't consider in decision-making. Here are three classifications of period expenses:Ĭurrent expense: Current expenses are costs a company obtains relating to the current period. Period Cost: What's the Difference? What are the different types of period costs? ![]() Product costs can also include the direct labor costs for those who assemble the product using the materials.Īdditionally, product costs can include the indirect materials, such as nails, screws and other materials required for putting the product together. For example, if a company sells furniture pieces, the product costs can include fabric and wood. A product cost can include the materials required for the creation of it so consumers can purchase the goods. While a period cost comprises the costs indirectly related to the product development process, product costs are the costs directly related to the product development. ![]() Related: Guide to General and Administrative Expenses (G&A) What's the difference between period and product costs? You can also refer to these categories as sales, general and administrative (SG&A) costs. An example of this cost can include employee salaries and office space and maintenance rent. These costs include employee commission sales and traveling to meet with potential customers or clients.Īdministrative costs: Administrative costs include indirectly related expenses to support the company's ability to sell its products or services. Selling costs: Selling costs include the indirectly related expenses to advertise the company and its general products or services it offers to consumers, rather than promoting a single product or service. You may divide period costs into two categories: Therefore, companies include period costs in a financial statement during an assigned accounting period. This means they're unrelated to the cost of one product or inventory costs for a business. Period costs are any costs a company incurs indirectly related to the production process.
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