The Difference Between Product Cost and Period Cost. (Cost Accounting)
Product costs are also called variable costs. It refers to that cost which varies in direct proportion to the volume of output. The cost per unit of product cost remains unchanged as production increases or decreases but total cost increases. So such type of costs are called product costs. For example; cost of direct material, direct labor and direct expenses.
Period cost is the fixed cost. It refers to that cost which remains unchanged by change in volume of out put. Fixed cost per unit decreases as production increases and increases as production declines. These costs are called period costs because it is dependant on the time rather than the volume of out put. Example of fixed costs are rent of the factory building, Salary of managers, Insurance of building etc.