Answer:
Explanation:
Period costs and product costs are two classes of costs that are incurred in producing and selling a product or service.
Product costs are the direct costs involved in producing a product. A manufacturer, for example, would have production costs that include: Direct labor, Raw materials, Manufacturing supplies Overhead that's directly tied to the production facility such as electricity.
Period costs are not directly tied to the production process. Overhead or sales, general, and administrative (SG&A) costs are considered period costs. SG&A includes costs of the corporate office, selling, marketing, and the overall administration of company business. Period costs are not attached to one particular product or the cost of inventory like product costs.
In this exercise:
Product cost:
Cost of electricity at the paper mill.
Cost of chemicals to treat the paper.
Depreciation on the manufacturing plant.
Cost to purchase wood pulp.
Period cost:
Salaries of scientists studying ways to speed forest growth.
Cost of computer software to track WIP Inventory.
Salaries of the company's top executives.
Cost of TV ads.
Life insurance on the CEO.
