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    Period and product costs

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    1. Why do managers need to understand product and period costs? In your explanation, please also briefly describe product and period costs, along with their differences.
    2. As a manager in a business, you have to make many decisions on how budgeting takes place. If you had a choice in a company where you are a manager, would you use top down budgeting or bottom up budgeting?

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    Solution Preview

    The response is attached.

    Accounting Questions on Product and Period Costs and Budgeting
    1. Why do managers need to understand product and period costs? In your explanation, please also briefly describe product and period costs, along with their differences.
    Business costs are placed into two categories: product costs and period costs. Product costs are costs that are included in the cost of goods manufactured. Product costs are the costs linked to the manufacturing process such as: material, labor costs and overheads. The costs have to recognize when the revenue is generated for the goods. In other words, the product costs are only realized when the sale of the product is realized. The product costs are debit in the cost of goods manufactured, which is expensed at the time of sale of the goods. Product costs are classified as direct material, direct labor and factory overhead.

    Period costs are any costs not classified as a product cost. Since period costs ...

    Solution Summary

    The period and product costs are defined and examples are provided. There is also an examination of the top down and bottom up budgeting and a description of the budgeting method that I prefer.

    $2.19

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