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Describe the difference between period costs and product costs.

(Period /Product costs) are operating costs that are expensed in the accounting period in which they are incurred.

(Period/Product costs) are all costs of a product that GAAP requires companies to treat as an asset for extemal financial reporting. These costs are recorded as an asset (inventory) on the balance sheet until the asset is sold. The cost is then transferred to an expense account, ??.

On the income statement, ?? is subtracted from ?? to determine gross proft. The ?? are then subtracted to determine operating income.

Classify Lawlor's costs as period costs or product costs.

If the costs are product costs, further classify as direct materials, direct labor or manufacturing overhead.

Shaft and handle of weed trimmer
Motor of weed trimmer
Factory labor for workers assembling weed trimmers
Nylon thread used by the weed trimmer (not traced to the product)
Glue to hold housing together
Plant janitorial wages
Depreciation on factory equipment
Rent on plant
Sales commissions
Administrative salaries
Plant utilities
Shipping costs to deliver finished weed trimmers to customers

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Explanation:

The period cost is the cost that is incurred with the passage of time. It mainly involves the major portion of the selling and administration expenses like - selling expenses, advertising expenses. It is a fixed cost

While the product cost involves the cost related to the product. It involves direct material cost, direct labor cost, and the manufacturing overhead cost. It is a variable cost

So, the period cost is the operating cost that are expenses when it is incurred

Whereas the product cost is treat as an asset for external financial reporting. First this is recorded as an asset on the balance sheet until asset is sold and then it is transferred to the cost of goods sold i.e expense account

Now on the income statement the product cost or cost of goods sold is subtracted from the sales revenue so that the gross profit could come

Then the period cost is deducted to find out the operating income

Now the classification of the product cost and the period cost are as follows

Shaft and handle of weed trimmer  = Direct material cost

Motor of weed trimmer   = Direct material cost

Factory labor for workers assembling weed trimmers  = Direct labor cost

Nylon thread used by the weed trimmer (not traced to the product)  = Manufacturing overhead cost

Glue to hold housing together   = Manufacturing overhead cost

Plant janitorial wages   = Manufacturing overhead cost

Depreciation on factory equipment   = Manufacturing overhead cost

Rent on plant   = Manufacturing overhead cost

Sales commissions  = Period cost

Administrative salaries  = Period cost

Plant utilities  = Manufacturing overhead cost

Shipping costs to deliver finished weed trimmers to customers = Period cost

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