Period costs product costs versus period costs

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Unformatted text preview: ct Costs Versus Period Costs Product costs include direct materials, direct labor, and manufacturing overhead Inventory Period costs include all selling costs and administrative costs Cost of Good Sold Expense Income Statement Income Statement Sale Balance Sheet Learning Objective 3 Understand the differences between variable costs, fixed costs and mixed costs Cost Classifications for Predicting Cost Behavior How a cost will react to changes in the level of activity within the relevant range Total variable costs change when activity changes Total fixed costs remain unchanged when activity changes Variable Cost: varies in total when activities change Example: Cost of good sold, direct labor, direct materials, variable elements of manufacturing overhead, variable elements of selling and administrative expense. Variable Cost Per Unit The variable cost per unit is constant. Fixed Cost: Remain constant regardless of changes in the level of activity. Example: straight-line depreciation, insurance, property taxes, rent, supervisory salaries, administrative salaries and advertising. Fixed Cost...
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