![]() For example, if a company sells furniture pieces, the product costs can include fabric and wood. ![]() A product cost can include the materials required for the creation of it so consumers can purchase the goods. While a period cost comprises the costs indirectly related to the product development process, product costs are the costs directly related to the product development. Related: Guide to General and Administrative Expenses (G&A) What's the difference between period and product costs? You can also refer to these categories as sales, general and administrative (SG&A) costs. An example of this cost can include employee salaries and office space and maintenance rent. These costs include employee commission sales and traveling to meet with potential customers or clients.Īdministrative costs: Administrative costs include indirectly related expenses to support the company's ability to sell its products or services. ![]() Selling costs: Selling costs include the indirectly related expenses to advertise the company and its general products or services it offers to consumers, rather than promoting a single product or service. You may divide period costs into two categories: Therefore, companies include period costs in a financial statement during an assigned accounting period. This means they're unrelated to the cost of one product or inventory costs for a business. Period costs are any costs a company incurs indirectly related to the production process.
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