The Primary Difference Between a Product Cost and a Period

question 11

Multiple Choice

The primary difference between a product cost and a period cost is that:

• A) product costs are associated with specific goods, and period costs are not.
• B) product costs are incurred by manufacturers, and period costs by service providers.
• C) only product costs are recorded as expenses.
• D) period costs become part of cost of goods sold but product costs do not.

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Definitions:

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually pay.

Free Trade

An economic policy that allows goods and services to be traded between countries with few or no barriers such as tariffs or quotas.

Autarky

An economic system of self-sufficiency where a country or region attempts to produce everything it needs without engaging in international trade.

Total Surplus

The sum of consumer surplus and producer surplus, representing the total net benefit to society from the production and consumption of a good.