Product Cost vs Period Cost - Accounting

The video tutorial explains the concepts of product and period costs in managerial accounting. Product costs include direct materials, direct labor, and manufacturing overhead, which are associated with creating a product. Period costs, on the other hand, are related to accounting periods and include selling and administrative expenses. The tutorial also discusses how these costs are categorized and expensed.

Which of the following is considered a direct material cost?

• The cost of lumber used in building a house

• The salary of a factory supervisor

• The commission for a sales agent

• The electricity bill for the factory

What is the primary characteristic of direct labor costs?

• They are not easily traceable to the final product

• They are considered period costs

• They include the salaries of administrative staff

• They are easily traceable to the final product

Which of the following is an example of a selling expense?

• The salary of the CEO

• The rent for the factory

• The salary of a sales agent

• The cost of raw materials

Administrative expenses are primarily associated with which of the following?

• The manufacturing process

• The general management of the organization

• The direct creation of a product

• The distribution of goods

How are indirect costs categorized in product costs?

• As manufacturing overhead

• As direct labor

• As direct material

• As selling expenses