All manufacturing expenses, costs incurred in the factory or production process, (i.e., direct materials, direct labor, and factory overhead) are product costs. From above example, it is apparent that the product costs like direct materials, direct labor and manufacturing overhead might be incurred during one period but expensed in a following period when the related goods are sold. All costs that are not included in product costs are referred to as https://tax-tips.org/what-is-a-recovery-rebate-tax-credit/ period costs; costs throughout a certain manufacturing period that are not directly related to the production process. A manufacturer’s product costs are the direct materials, direct labor, and manufacturing overhead used in making its products. Sunk costs – historical costs that will not make any difference in making a decision. In other words, these costs refer to those that will affect a decision. Mixed costs – costs that vary in total but not in proportion to changes in activity. Fixed costs – costs that remain constant regardless of the level of activity. Variable costs – vary in total in proportion to changes in …