Product costs and period costs
Product costs are those needed to make what is sold, and they travel with the product into inventory until it is sold. Period costs, such as marketing and administration, are charged to the period in which they occur.
Product costs → inventory → cost of sales on sale | Period costs → expense when incurred
Why it matters
Putting a period cost into inventory would hide a running expense inside an asset and flatter the current profit.
Where it appears in a CFO+ model
- In the cost lines: materials and production costs on one side, marketing and administration on the other.
- In the income statement, where cost of sales and operating expenses are shown separately.
Learn the concept in the Academy
Activities where it shows up
- Agriculture & Production
- Café & Coffee Shop
- Catering
- E-learning
- Fintech
- Fuel Station
- Gym & Fitness Club
- International Freight & Clearance
- Jewelry & Gold
- Maintenance & Technical Services
- Marketplace Platform
- Medical Laboratory
- Metal Machining & Fabrication
- Printing & Packaging
- Real Estate Brokerage
- Real Estate Development
- Tourist Camp
- Tourist Resort
- Training & Development
- Warehousing & Storage
No figures are published: a definition and a formula only.