The primary difference between a product cost and a period cost is that:
A) product costs are associated with specific goods, and period costs are not.
B) product costs are incurred by manufacturers, and period costs by service providers.
C) only product costs are recorded as expenses.
D) period costs become part of cost of goods sold but product costs do not.

Question

Quizplus · Accepted Answer

Product costs are directly associated with a specific product, while period costs are not. Product costs are inventoriable costs, which means they are included in the cost of goods sold when the product is sold. In contrast, period costs are expensed in the period in which they are incurred. Examples of product costs include direct materials, direct labor, and manufacturing overhead, while period costs include items like rent, utilities, and advertising expenses.

The Primary Difference Between a Product Cost and a Period