Question

Differentiate between product costs and period costs.

Answer 1

Basis for comparison	Product cost	Period cost
Meaning	Costs which become part of the cost of the product are known as product costs.	Costs which are associated with period not products are called period costs.
Basis volume which cost is regarded as Product/Period Cost?	Variable Cost	Fixed Cost
Are these costs included in inventory valuation?	Yes	No
Comprises of	Manufacturing or Production cost.	Non-manufacturing cost, i.e., office and administration, selling and distribution, etc
Part of cost of Production	Yes	No
Examples	Cost of raw material and direct wages, depreciation of plant and machinery, etc.	Administrative expenses, salesmen's salaries, depreciation of office building, etc.,