Trending March 2024 # Period Cost Vs Product Cost # Suggested April 2024 # Top 7 Popular

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Difference Between Period Cost vs Product Cost

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Classification of cost into periods and products is generally for financial accounting purposes. Both terms are important in the development of an income statement. A proper determination of revenues and expenses must be based on a well-defined distinction between Period cost and Product cost.

Diagrammatic Representation of Cost

Period Cost

Period cost is the expense incurred; the period cost is all costs, not product costs. The cost incurred on the headquarters parts of the operation, such as all of the selling expenses and general and administrative costs, will be categorized as a period cost.

Period cost is not in manufacturing or transporting the assets to their final destination. That’s why the period cost is also a non-manufacturing cost. Period costs are on the income statement as expenses in the period they were incurred.

Period costs are often known as operating expenses or selling, general and administrative expenses. This cost is time-oriented and is more associated with time passage than transactional events. Period cost is important for generating revenues, but it does not directly link with units of products.

Product Cost

There are three major categories of product costs which are as follows:

Direct Material cost.

Direct Labour cost.

Manufacturing Overhead Cost.

Product costs are one of the most important costs managers need to know. Knowing the cost of a product is necessary to ensure its price is correct, or the company should increase or decrease production or even discontinue the product altogether.

Most companies use two different definitions of total product cost and Inventoriable product cost. The company uses the total cost for internal decision-making. It includes all the costs of the value chain.

Company management needs to know the total costs to price goods high enough to cover these costs and still make a normal profit. Inventoriable product costs, sometimes just product costs, are only incurred during the value chain’s production stage. Inventoriable product costs are required for the cost of the assets, that is, inventory, rather than total product costs.

Head-to-Head Comparison between Period Cost vs Product Cost (Infographics)

Key Differences Between Period Cost vs Product Cost

Let us discuss some of the major differences between Period Cost and Product Cost:

Product cost is that cost that is directly or indirectly traceable with the product. Direct costs include direct material and labor costs, and indirect costs include manufacturing overhead. Period cost is a cost that is not traceable with the product is a period cost. It means that period cost has nothing to do with the product.

Simply put, we can say that product cost is the cost of inventory valuation. However, the period cost should not be for inventory valuation.

If cost is due to resources related to manufacturing and production, then it is considered product cost. Many countries’ product costs are also inventoriable costs. If the cost is not part of the manufacturing process, it is a period cost.

Product cost is evaluated based on the volume because, throughout the production, the product unit price will be the same only volume of it will change. However, the Period cost is based on time. Expenditures are identified more with a time period than with finished product costs.

For financial reporting purposes, the product cost becomes a component of the cost of goods manufacturing and the cost of goods sold and is in the balance sheet. However, the period cost expenses to the income statement for financial reporting purposes.

Period Cost vs Product Cost Comparison of Table

Let us discuss the topmost differences between Period Cost vs Product Cost:

Difference Period Cost Product cost

Definition Period cost is a time-oriented cost and is not connected with production is called Period cost. The costs which are a part of the cost of the product rather than the expense of the period in which they are incurred are called product costs.

Contains Period cost contains only non-manufacturing costs. Product cost contains Manufacturing and production cost.

Financial Reporting As period costs are not product costs, they are recorded as expenses on the income statement. Product costs are recorded as inventory in the balance sheet, and the cost of goods sold in the income statement. (After the sale of goods)

Cost Basis Period cost is time-oriented costs. Product cost is a volume-oriented cost.

Valuation Period cost should not consider for the valuation of inventory. In product cost, Inventory valuation is included.

Also Known as Period costs are also operating costs (excluding the cost of goods sold). Product costs are also inventoriable costs.

Example Selling costs, General and Administrative costs, Marketing costs, interest expenses, Depreciation expenses, office rent, etc. Direct material cost, labor cost, Variable Manufacturing overhead cost, and Fixed Manufacturing overhead cost.

Conclusion

From the above description, we can conclude that the cost due to the manufacturing unit is product cost, and the cost other than product cost is a period cost. Period cost is not in a straight line with the production of the end product. This period cost is not assigned to the products and is recorded on the income statement for the period they incurred. Product cost methods help company management price the end product to cover the production cost and profit from it. Cost segregation helps the company analyze the data in detail, which helps them make the internal decision.

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Cost Accounting Vs Financial Accounting

Difference Between Cost Accounting vs Financial Accounting

Cost Accounting is a method that records and analyses the cost incurred (per unit) during the production of goods. It analyses input costs individually, at every functional stage, including production, administration, R&D, selling & distribution. Financial Accounting involves recording and analyzing a company’s financial transactions for a specific period. The company summarizes it into financial statements demonstrating its profitability or the outcome of its operations.

Cost Accounting:

Example: Total cost of producing one unit of a pencil is Rs.30; the cost break up of various stages can be as below:

Figure 1: Cost breakdown

Financial accounting:

Example: If the same pencil is sold for Rs.50 and the cost of making a pencil and other expenses sum up to Rs.40, then the profit would be Rs.10, as below.

Figure 2: Income & expenditure

Head-to-Head Comparison Between Cost Accounting vs Financial Accounting

Below is the top 13 difference between Cost Accounting vs Financial Accounting

Key Differences Between Cost Accounting vs Financial Accounting

Let us discuss some of the major differences Between Cost Accounting vs Financial Accounting:

1. In cost accounting, we assess the per unit cost incurred to produce and sell products to ensure we can sell them at the appropriate price. On the other hand, financial accounting focuses on all monetary transactions to determine a firm’s profitability and financial health.

2. Cost accounting is an internal instrument for management to measure efficiency and decide on a company’s operations. On the other hand, Financial accounting prepares financial statements to show performance to the entities external to the company, like investors and creditors, etc.

Cost accounting: Management uses it for budgeting, cost control, cost reduction, and inventory management, among others, so that it can improve margins

Financial accounting:  Knowing if the company is operating efficiently and if the money invested by outsiders will be able to generate returns or not is useful for people outside the firm.

3. Cost accounting can be allocated and recorded under various categories such as direct cost, indirect cost, fixed cost, variable cost, operating and non-operating cost, etc., whereas Financial accounting records items based on the nature of the transaction, such as income & expenditure, cash inflow, and outflow, assets and liabilities under three statements profit & loss account, cash flow statement and balance sheet respectively

4. Decisions made based on

Cost accounting (internal):

Whether new machinery should be bought?

Should the old machinery be disposed of

How costly/profitable can a new product become?

Financial accounting (external):

If the creditor should lend money and at what interest rate?

Based on performance, how much should be invested in a firm?

Cost Accounting vs Financial Accounting Comparison Table

Let’s look at the topmost Comparison between Cost Accounting vs Financial Accounting.

The Basis of Comparison 

Cost Accounting

Financial Accounting

Nature Records information that is financial in nature alone

Cost-type Records historical (eg: a cost of acquiring assets) as well as forecasted cost (eg: sales order) Records only historical cost (accrued during the specified time)

Objective To find out the per unit cost of a project, fixing the selling price of a product To assess the profitability and financial position of the company

End-users Management, including employees, directors, and managers, utilize cost accounting for internal assessment and management. External parties utilize financial accounting, including shareholders, lenders, prospective investors, and credit rating agencies in the market.

Information Financial accounting records monetary and non-monetary transactions, including units, to provide a comprehensive view of a firm’s financial performance and position. Only records monetary transactions

Frequency The management receives and reviews the prepared report as and when required. The company prepares it at the end of the accounting period, usually one year.

Coverage Analyses operations divided by segments (operational or geographical), divisions, contracts, etc. Analyses the operations of a company as a whole

Measurement of profit It measures the profit for a product or process It measures the profit for the whole entity for a combined entity

Reporting It is not mandatory to prepare any statements for public Public companies must announce results that they prepare as part of Financial Accounting.

Forecasting The budgeting technique forecasts cost accounting. It is not possible to forecast financial accounting

Format No specific format is used; the intention is to record all the important information. Independent agencies design and control formalized principles such as GAAP and IFRS.

Reports Variance analysis, marginal cost, break-even analysis Profit & Loss, Balance sheet, cash flow statement

Stock The stock is valued at the cost The stock is valued at the lesser of the market price or cost.

Conclusion

Cost accounting is an indirect part of financial accounting and a direct part of management accounting. Using cost and financial accounting together can reduce costs and increase a firm’s profitability.

Based on information recorded under cost and financial accounting, various analyses can be prepared, such as ratios, growth & margin trends, and industry comparison. Cost accounting information compares the cost with the revenue recorded under financial accounting. Financial accounting is required as compliance under universally defined principles, while cost accounting co-exists as a small part of the analysis.

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How Explicit Cost Differs From Implicit Cost?

Definition of Explicit Cost

Explicit cost refers to all accounting costs which the business incurred in actual in production and selling of its output and is deducted from total revenue to derive the accounting profit. Thus the explicit cost is actual expenses directly incurred by the business, easily identifiable, and are admissible by the business as the cost of production following the accounting rules followed by it. it is also known as out of pocket cost.

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Explanation

Explicit cost doesn’t leave any room of confusion as these are real cash outflows and impact business cash flows. Further explicit cost items are analyzed to understand and take action where necessary to improve the efficiency of the business.

Examples of Explicit Cost

All cost which is directly incurred by the business and form parts of its book of account is explicit costs. The financial statements which are analyzed by various stakeholders include all explicit costs incurred by the business. Let’s understand the explicit cost with the help of an example:

Springboard company has provided the following information for the year ended 31.03.2024. based on the below information compute the accounting profit.

Account Name

Amount in USD

Net Revenues 250,000

Expenses

Rent paid

Electricity charges paid

Salary

Interest paid

Raw material cost

The implicit cost of owner premises

Implicit salary of Promoter skillset

20000

5000

9000

15000

120000

15000

20000

Based on the above let’s compute Accounting Profit:

Accounting Profit= Net Revenues – Rent Expenses – Electricity Charges – Salaries – Interest Expenses Paid – Raw Material Cost

Accounting Profit = ($250000 – $20000 – $5000 – $9000 – $15000 – $120000)

Accounting Profit = $81000

Representation of Explicit Cost

Explicit cost is a tangible cost which is well documented and forms part of business expenditure. It is a representative of the cost incurred and is tracked by business to measure its efficiency and efficacy on various business parameters. Explicit costs are closely tracked by analysts and stakeholders in measuring business performance.

Uses of Explicit Cost

There are many uses of explicit Cost. Few are enumerated below:

The first and foremost use of Explicit Cost is to measure the profitability of the business as this cost is directly adjusted from Revenues to determine Profit.

It helps in analyzing the long term trend for the business as different cost trends can be analyzed over a period and projection can be undertaken easily.

Explicit cost form part of the Income statement. An income statement is incomplete without Explicit Cost.

Importance of Explicit Cost

Explicit cost is important and an indispensable part of the business. These costs are accounted for and its importance is well understood. Explicit cost is accounting costs that involve actual payments made by the business for different goods and services which are required in the regular running and production activities of the business. It is important to note that for measuring profitability only explicit cost is taken into consideration as the implicit cost is used for measuring economic profit for the business.

Advantages of Explicit Cost

Explicit cost is a reliable source of determining business expenses which are well accounted and included in Income Statement.

Easily recognizable and can be ascertained in cash leaving no room for ambiguity in ascertaining the cost.

Explicit cost is required for computing both accounting profit as well as economic profit. Even if a business wishes to include opportunity cost for determining total return they will have to include explicit cost and if they just want accounting return then also the explicit cost is a must.

All reporting and recording of costs undertaken by businesses relate to explicit costs. However, there are other non-cash expenses also which form part of business expenditure which is not an explicit cost.

How Explicit Cost Differs From Implicit Cost?

The two costs are frequently named whenever business performance is to be measure. however, the two costs differ. Key differences are enumerated below:

Basis

Explicit Cost

Implicit Cost

Meaning It refers to all direct cash expenses undertaken by the business which forms part of the income statement. It refers to those costs which cannot be ascertained directly and which are more of an opportunity cost perspective.

Type of Profit It is required to be included for computing both accounting profit as well as economic profit. It is required to be included for computing both economic profit only and doesn’t form part of income statement.

Opportunity Cost It doesn’t involve the concept of opportunity cost It is based on the premise of opportunity cost itself.

Rationale The purpose of including explicit cost is based on the premise that whatever cost incurred which can be determined and decimated only needs to be accounted for. The purpose of implicit cost is to include all those expenses which are not directly determinable; however, all those costs have directly contributed revenues for the business and true measure profit will be one which includes these costs as well. for instance, time spent by promoter using their expertise, usage of owner premises which otherwise would have been utilized/rented elsewhere is some examples of implicit cost.

Conclusion

Explicit cost is direct cash outflows undertaken by the business in its regular business operations. these costs can take the form of wages, salaries, interest paid, material cost, etc, or any other cost which can be thought of and which can be ascertained as directly incurred by the business. Here it is important to note that explicit cost involves a cost that results in cash outflow and as such expenses like depreciation and amortization which are non-cash expenses are not explicit cost.

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Data Breach Cost Reaches All

CAMBRIDGE, Mass. — Data breaches now cost companies an average of $4.24 million per incident, according to a recent report.

The finding is part of 17th-annual “Cost of Data Breach Report” by IBM Security and represents the highest-ever average cost in the global report, according to IBM last month. 

The report is based on “in-depth analysis” of real-world data breaches experienced by over 500 organizations.

Security incidents became costlier and harder to contain due to drastic operational shifts during the pandemic, with costs rising 10% compared to the prior year, according to the report.

Companies were forced to quickly adapt their technology approaches last year, with many of them encouraging or requiring employees to work from home — and 60% of organizations moving further into cloud-based activities during the COVID-19 pandemic.

The findings in the “Cost of Data Breach Report” suggest that security might have lagged behind these rapid IT changes, hindering organizations’ ability to respond to data breaches:   

Key Findings

Remote work impact:

Breaches cost over $1 million more on average when remote work was indicated as a factor in the event, compared to those in the group without this factor ($4.96 vs. $3.89 million)

Health care breach costs surged:

Industries that faced huge operational changes during the pandemic (health care, retail, hospitality, and consumer manufacturing/distribution) experienced a substantial increase in data breach. Health care breaches cost the most by far, at $9.23 million per incident, a $2 million increase

Compromised credentials led to compromised data:

Stolen user credentials were the most common root cause of breaches. Customer personal data (such as name, email, password) was the most common type of information exposed in data breaches, with 44% of breaches including this type of data

Modern approaches reduced costs:

The adoption of artificial intelligence (AI), security analytics, and encryption were the top three mitigating factors shown to reduce the cost of a breach, saving companies between $1.25 million and $1.49 million compared to those that did not have significant usage of these tools. For cloud-based data breaches studied, organizations that implemented a hybrid cloud approach had lower data breach costs ($3.61 million) than those that had a primarily public cloud ($4.80 million) or primarily private cloud approach ($4.55 million).

Additional Findings

Time to respond:

Average time to detect and contain a data breach was 287 days (212 to detect, 75 to contain), which is one week longer than the prior year

Mega breaches:

Average cost of a mega breach was $401 million, for breaches between 50 million and 65 million records. This is nearly 100x more expensive than the majority of breaches (which ranged from 1,000-100,000 records)

By industry:

Data breaches in health care were most expensive by industry ($9.23 million), followed by financial ($5.72 million) and pharmaceuticals ($5.04 million). While lower in overall costs, retail, media, hospitality, and the public sector experienced a large increase in costs vs. the prior year

By country/region:

The U.S. had the most expensive data breaches at $9.05 million per incident, followed by the Middle East ($6.93 million) and Canada ($5.4 million)

See more: Survey Shows Cybersecurity Is Main Driver Of IT ‘Modernization’ In Government

“Higher data breach costs are yet another added expense for businesses in the wake of rapid technology shifts during the pandemic,” said Chris McCurdy, VP and GM, IBM Security. 

“While data breach costs reached a record high over the past year, the report also showed positive signs about the impact of modern security tactics, such as AI, automation, and the adoption of a zero-trust approach – which may pay off in reducing the cost of these incidents further down the line.”

Methodology

The 2023 “Cost of a Data Breach Report” was conducted by Ponemon Institute for IBM Security.

The report is based on data breaches of 100,000 records or less experienced by over 500 organizations worldwide between May 2023 and March 2023. 

The report takes into account hundreds of cost factors involved in data breach incidents: including legal, regulatory, and technical activities; and loss of brand equity, customers, and employee productivity.

See more: Top Cloud Security Companies & Solutions

How Much Does Email Marketing Cost?

Today every business is using email marketing irrespective of their niche. The cost of email marketing does have some ups and downs in the process. Read on to know more about the same!

Now digital marketing is a huge concept with tons of processes and modules. But the one that strikes everyone’s mind after hearing about digital marketing is Email marketing. E-mail marketing is one of the main and most used modules of digital marketing.

From very small businesses to multinational giants, every company or even famous personalities use email marketing to grow their business and increase their user base. But still, many small businesses don’t know how much does email marketing costs, and due to no or less knowledge about pricing, they ignore it. This blog will discuss what e-mail marketing is and how much it costs.

What is Email Marketing?

So, a person can easily understand what e-mail marketing is by its name. It simply means marketing through E-mail. So, basically, E-mail acts as a marketing channel through which brand or business do their marketing campaigns. Now the reason why it is popular and effective is its user base.

Pricing of Email Marketing

E-mail marketing is a huge concept, or you can say it is a well-ordered process with proper planning. Now, there is nothing like email marketing cost; pricing is calculated for email marketing campaigns. And the cost of an email marketing campaign depends upon multiple factors. So, let’s see what factors does cost of e-mail marketing depends

E-Mail Service Provider or Tool

Well, you can’t do everything by yourself. Even if you are a small business owner with a tight budget, you must spend some money on E mail service provider or tool. Don’t confuse this with email marketing agency because it is different. An E-mail service provider is a tool or software which allows you to run your e-mail marketing campaigns. It is only limited to the delivery of your e-mails and reports or the performance of your campaigns. You have to do all other things on your own, which is why it is a cheap option compared to hiring an email marketing agency. Now, these tools or software have different plans, and the more the features more their pricing.

Size of Email Lists

Now, this is very important because if your email list is huge, you have to pay a lot. Doesn’t matter which software you use or even if you have hired an agency; pricing will increase with the size of e-mail lists. Both software and agencies offer some limits in their plans, and the costlier the plan is, the more limit they provide. Every business or brand wants to increase its email lists, so ultimately, your cost for email marketing will increase in the future. The would-be no chance that you cut down your costs once you start email marketing, and if you do so, it will negatively impact your business growth.

Volume of Email

This factor also directly impacts the cost of email marketing. Volume simply means how many emails you want to send your subscribers in a specific time frame. Now, this specific time frame is a part of your email marketing strategy, but for e-mail service providers and agencies, this time frame is one month. It means they set their pricing or plan every month, so you will get a specific number of emails in a month. Here also, the costlier the plan, the more volume you will get. So, it depends upon your strategy and other factors also. For example, some businesses must send mail daily to keep their customers updated, while sending mail in a month is sufficient for some.

How Much Does Email Marketing Cost

But the question of how much does email marketing costs still exists. By telling you the factors, we wanted to tell you the cost is not fixed; it depends upon your marketing goals, strategies, and business requirements. But to give you an idea for a small and new business, email marketing can cost between $25 to $300 per month. For medium businesses, it can cost between $500 to $1000, and for a well-established business, it can cost more than $1500 per month.

Wrapping up

Email marketing is undoubtedly one of the most effective marketing strategies, and it is also considered the cheapest one as compared to other techniques. After reading this blog, you will understand that e-mail marketing costs may vary from business to business because it depends on multiple factors. However, we have given some rough estimates to clear your doubts regarding how much does email marketing costs.

Ifttt Pricing: Is Pro Worth The Cost?

If This, Then That–or IFTTT–is an automation service that allows users to create “Applets,” or automated tasks that take place when certain conditions are met. Until recently, the service was completely free to use, but IFTTT has now introduced a Pro pricing tier that has changed things up a bit. 

The question is whether or not IFTTT Pro pricing is worth it. Several major changes have taken place that make the Pro service worthwhile to certain users, but it isn’t the right choice for everyone.

Table of Contents

Functionality

The first major change is in the total number of available Applets. Before the introduction of IFTTT Pro, users could have an unlimited number of Applets running. Now that number is limited to only three. It doesn’t matter whether the Applets are running or not. To access unlimited Applets, you will need to pay for IFTTT Pro.

A new feature is the introduction of multi-step Applets. Previously, IFTTT commands were limited to two-step interactions. Now users can create multiple steps per Applet to give even more refined control over the service. These additional steps can utilize queries and conditional logic, making them much more powerful than the simple processes previously available.

Multiple steps means users can introduce more precise control. For example, in the above photo, the second Applet triggers “game mode.” It changes all the lights to a single color. With multiple steps, that same Applet can change individual lights to specific shades of color to better suit the game or the space.

If you use IFTTT Pro, the service checks for updates to conditional triggers more often and executes Applets faster. IFTTT Pro also offers customer support. This makes a huge difference in the performance of IFTTT applets, as many Applets had significant, noticeable lag between the trigger action and the condition. 

The query feature means that multiple steps can be performed depending on the Applet. For example, if a leak is detected within the home through a smart device, the Applet can search for you and determine your location through GPS. If you are far from home, you will receive a push notification.

On the other hand, if you are at home, the Applet can trigger a physical alert somewhere within the house, such as a chime or changing the color of the lights. You can determine all of these functions upon creating the Applet. 

It will also supposedly be possible to set how long an Applet will function. This means that rather than remaining on while conditions are met, an Applet could turn off automatically after a set amount of time.

At present, there are no conditional terms or device compatibility that is restricted behind the Pro tier, although that might change in the future. IFTTT Pro is an upgraded version of the base service.

IFTTT Pricing

The most interesting part of IFTTT Pro is the pricing. At the moment, there isn’t a set, dedicated price. In fact, users have the option to set their price as one of four options: $3.99, $5.99, $9.99, and custom. The custom field allows you to set the price you want to pay, as long as it is at least $1.99 per month. 

It’s an interesting approach, and one IFTTT hopes will ease the transition from a free service to a paid service. Think of it almost like a Kickstarter stretch goal. The product already exists, but the team is willing to take additional payment.

Something worth noting, however, is the phrasing. According to IFTTT, “For a limited time, you may set your price for IFTTT Pro and we will honor it indefinitely. All subscriptions are in US$ and renew monthly.” 

The price may go up soon, and the pledge to honor the current price might not last for much longer. If you are interested in subscribing to IFTTT Pro at a lower price point than $3.99, act quickly.

Is IFTTT Pro Worth It?

This holds especially true if you can use IFTTT Pro to replace other subscription services. For example, the paid tiers of many home security cameras provide added functionality, but this can often be replicated through well-designed Applets.

On the other hand, if you only use IFTTT for a few minor tasks and have no need for multi-step Applets or more than three Applets at a time, then subscribing to the Pro version won’t make a huge difference. Doing so would support the growth of IFTTT as a company, but you wouldn’t likely gain many benefits from the actual subscription. 

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