Nonproduction Costs
Nonproduction costs are divided into two categories: marketing (selling) costs and administrative costs. Marking and administrative costs are not inventoried and are called Period costs. Period costs are expensed in the period in which they are incurred. Thus, period costs are not inventoried and are not assigned to products. Period costs appear on the income statement not the balance sheet. In a manufacturing organization, the level of these costs can be significant (often greater than 25 percent of sales revenue), and controlling them may bring greater cost saving than the same control exercise in the area of production costs.