Period costs include which of the following?

In Accounting MCQs, period costs are expenses that are not directly related to the production of goods. These costs are charged to the income statement in the period in which they occur, regardless of how many units are produced or sold. Period costs are linked with time, not with manufacturing activity.

Selling expenses are a major example of period costs. These include advertising costs, sales salaries, marketing expenses, delivery expenses, and sales commissions. Since these expenses do not contribute directly to the manufacturing process, they are treated as period costs. That is why, in this question, selling expense is the correct answer.

Understanding the difference between period costs and product costs is very important for Finance MCQs and Accounting MCQs. Product costs are directly associated with production and include raw materials, direct labor, and manufacturing overhead. These costs are first recorded as inventory and only become expenses when the product is sold. This is why raw material, direct labor, and manufacturing overhead cannot be considered period costs.

Period costs, on the other hand, are expensed immediately. They are not stored as inventory and are not attached to the cost of goods manufactured. These costs mainly include selling and administrative expenses, office expenses, and general business expenses. In exams, whenever you see costs related to marketing, selling, or administration, they usually fall under period costs.

In Accounting MCQs, the keyword to focus on is “period”. If a cost is related to time and operations rather than production, it is a period cost. Selling expenses happen regularly during a period and are not dependent on the number of units produced. Therefore, they are recorded in the same accounting period in which they are incurred.

The other options given in the question are incorrect because they are all product costs. Raw material is used directly in production, direct labor represents workers involved in manufacturing, and manufacturing overhead includes factory-related costs. These are not period costs.