Product cost vs period cost

What is a product cost versus a period cost? Let’s discuss the accounting concepts product cost and period cost with some easy to understand examples.
⏱️TIMESTAMPS⏱️
0:00 Introduction
0:30 Product cost vs period cost definition
0:48 Product cost vs period cost examples
2:29 Product cost in cost accounting
3:21 Product cost and period cost in the income statement
Product costs include all the costs that are involved in acquiring or making product. Product costs are viewed as "attaching" to units of product as the goods are purchased or manufactured. Inventory is an asset on the balance sheet. This is why product costs are sometimes called “inventoriable costs”, they remain attached as the goods go into inventory awaiting sale.
Period costs are expensed on the income statement in the period in which they are incurred. Period costs are not a necessary part of the manufacturing process. As a result, period costs cannot be assigned to the products or to the cost of inventory.
Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business and #accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investing decisions. Philip delivers #financetraining in various formats: KZread videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

Пікірлер: 37

  • @MrAhmedrocks234
    @MrAhmedrocks2345 жыл бұрын

    Thank you! At one point around the 3:20 mark, you mistakenly said period costs instead of product costs are sometimes called inventoriable costs

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    5 жыл бұрын

    Thank you very much for spotting that mistake. I have inserted at this timestamp a card, and updated the subtitles, to point viewers at the correction.

  • @fedoraazalia

    @fedoraazalia

    Жыл бұрын

    @@TheFinanceStoryteller is salaries of personnel who work in the finished goods warehouse part of manufacturing overhead?

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    Жыл бұрын

    @@fedoraazalia Hi! I would be inclined to say this is a period cost, as you could consider it part of the selling expenses, which in turn is part of SG&A (selling, general and administrative expenses). But I am not completely sure.

  • @shannendominiquebacor3367
    @shannendominiquebacor33673 жыл бұрын

    Thank you for this very comprehensive explanation!

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    3 жыл бұрын

    Glad it was helpful, Shannen! 🙂

  • @vigneshmuralidharan4692
    @vigneshmuralidharan46925 жыл бұрын

    Thank you! Very helpful!

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    5 жыл бұрын

    You're welcome!

  • @namnguyen-co2ny
    @namnguyen-co2ny3 жыл бұрын

    you helped me with my homework! thank you :)

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    3 жыл бұрын

    Happy to help! Understanding product cost vs period cost is key in inventory valuation, cost of goods sold, and gross margin. Once you get it, a lot of other things become simple....

  • @cordia1929
    @cordia1929 Жыл бұрын

    Thank you soooo much!

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    Жыл бұрын

    Happy to help!

  • @britbrown9030
    @britbrown90304 жыл бұрын

    Saved me😭 thank you so much ❤

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    4 жыл бұрын

    You're welcome, Briteny! :-)

  • @muhammadridhwan1075
    @muhammadridhwan10754 жыл бұрын

    doesnt stick to the product.you explained very well love this video

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    4 жыл бұрын

    Thank you, Muhammad! Nice to hear that.

  • @konstancyja82
    @konstancyja825 жыл бұрын

    Genius !!

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    5 жыл бұрын

    Thank you!

  • @opgfo1
    @opgfo13 жыл бұрын

    Thank you accounting Khabib

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    3 жыл бұрын

    You're welcome!

  • @ninsssssss
    @ninsssssss Жыл бұрын

    what about salary's labour in factory ? its product or periode ?

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    Жыл бұрын

    Product cost.

  • @iloveyourodman7023
    @iloveyourodman70232 жыл бұрын

    loved this thank u my nigga

  • @fedoraazalia
    @fedoraazalia Жыл бұрын

    Sir, what about salaries of personnel who work in the finished goods warehouse? Is a period cost or product cost?

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    Жыл бұрын

    Hi! I would be inclined to say this is a period cost, as you could consider it part of the selling expenses, which in turn is part of SG&A (selling, general and administrative expenses). But I am not completely sure.

  • @fedoraazalia

    @fedoraazalia

    Жыл бұрын

    @@TheFinanceStoryteller thank you so much Sir!

  • @jingzhiwan3530
    @jingzhiwan35303 жыл бұрын

    3:15, you said period cost is sometimes called inventoriable cost, while textbook said product cost is inventoriable cost.

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    3 жыл бұрын

    You are absolutely correct! I put a note in the subtitles as well as the comments to highlight the mistake. My apologies!

  • @otakunutz9544
    @otakunutz9544 Жыл бұрын

    Where does indirect labor and indirect materials can be considered, can it both?

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    Жыл бұрын

    Yes, they can be considered product cost, as long as you keep the definition of "indirect" fairly tight, in other words have a strong link with the production location.

  • @yesaswinikatragadda4744
    @yesaswinikatragadda47443 жыл бұрын

    Danjewel! :)

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    3 жыл бұрын

    Graag gedaan! Veel plezier met de video's! :-)

  • @noonagrandeur2363
    @noonagrandeur2363 Жыл бұрын

    What about assembly cost? Is direct or indirect?

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    Жыл бұрын

    Product cost.

  • @noonagrandeur2363

    @noonagrandeur2363

    Жыл бұрын

    @@TheFinanceStoryteller so assembly cost is indirect?

  • @TheFinanceStoryteller

    @TheFinanceStoryteller

    Жыл бұрын

    Sounds like direct labor to put the product together, right?

  • @RaniSharma-tz7iv
    @RaniSharma-tz7iv3 жыл бұрын

    Tux