Picture this: you run a lemonade stand. You buy lemons and sugar. Those are product costs because they go directly into the lemonade.
Now, picture the money you spend on a neon sign that says "LEMONADE – $1." Or the cash you drop on a TikTok ad. Those are period costs.
They are not part of the physical product. You can't squeeze them into the pitcher.
They’re Like the Background Music of Your Business
Period costs are the expenses of running the business, not making the product. They include things like rent for your office, the salary of your marketing guru, and the bill for that insane coffee machine.
They also include your selling expenses (ads, salespeople's commissions) and your administrative expenses (accountant, CEO, paper clips). Basically, if it doesn't touch the product, it's a period cost.
And here’s the kicker: they are always expensed in the period they happen. No waiting around. Kaput. Gone.
