Costing TerminologyExpenses on an income statement are considered product or period costs. Product costs are those costs assigned to an inventory account that eventually become part of cost of goods sold. Examples of manufacturing product costs are raw materials used, direct labor, factory supervisor's salary, and factory utilities. In a manufacturing company, product costs are also called manufacturing costs. In a service company, product costs are also accumulated as inventory (such as the cost of an audit or of a will). Period costs are those costs recorded as an expense in the period they are incurred. Selling expenses such as sales salaries, sales commissions, and delivery expense, and general and administrative expenses such as office salaries, and depreciation on office equipment, are all considered period costs. In a manufacturing company, these costs are often referred to as
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