Sales commissions are not part of the cost of a product. Therefore, sales commissions are not assigned to the cost of goods held in inventory or to the cost of goods sold.

Is administrative cost a period cost?

Period costs are not directly tied to the production process. Overhead or sales, general, and administrative (SG&A) costs are considered period costs. Other examples of period costs include marketing expenses, rent (not directly tied to a production facility), office depreciation, and indirect labor.

Is manufacturing cost a period cost?

Items That are Not Period Costs Also, costs included in inventory, such as direct labor, direct materials, and manufacturing overhead, are not classified as period costs.

Is depreciation a product cost?

Product cost refers to the costs incurred to create a product. These costs include direct labor, direct materials, consumable production supplies, and factory overhead. Depreciation is a fixed cost, because it recurs in the same amount per period throughout the useful life of an asset.

Is commission a debit or credit?

Under the cash basis of accounting, you should record a commission when it is paid, so there is a credit to the cash account and a debit to the commission expense account. You can classify the commission expense as part of the cost of goods sold, since it directly relates to the sale of goods or services.

What is period cost in managerial accounting?

In managerial and cost accounting, period costs refer to costs that are not tied to or related to the production of inventory. Examples include selling, general and administrative (SG&A) expenses, marketing expenses, CEO salary, and rent expense relating to a corporate office.

Is CEO salary manufacturing overhead?

All expenses incurred outside the manufacturing process are not considered factory overhead. For example, wages paid to the company president, manager, or human resources employees are considered administrative overhead, as is all money spent on public relations and accounting.

Is salary of supervisor direct cost?

A particular cost may be direct cost for one cost object but indirect cost for another cost object. For example, the salary of a supervisor for a month who has only supervised the construction of a single building is a direct fixed cost incurred on the building.