Product Costs & Period Costs – Managerial Accounting

Product costs and period costs are distinctions of costs we generally see in managerial accounting. Product costs are costs assigned to production and include direct labor, direct materials and overhead. Period costs are costs incurred during a time period which are usually expensed and include selling an administrative costs. The distinction between product costs and period costs is important for managerial accounting because product costs will not be expensed at the time they are incurred but will be capitalized as part of the cost of inventory. Product costs will eventually be expenses in to form of cost of goods sold when the product is sold.
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