period cost
Period Cost is a business expense tied to time passing, like rent or salaries, not to how many units the business made or sold.
In plain English
A bakery in Ibadan bakes three hundred loaves on Monday and only forty on Tuesday because of rain and low turnout. The flour, sugar and yeast used go up and down with those numbers. But the rent on the shop, the salary of the woman at the till and the diesel for the generator keep asking to be paid whether ten loaves sell or three hundred do.
That second group is what accountants call period cost. It does not care what you produced. It cares that a month, a week or a day has passed. The bakery owner cannot dodge it by baking less, and cannot escape it by shutting the oven off for a day. It sits there calmly ticking with the calendar.
This is different from product cost, which rides along with each loaf, each bottle, each unit made, and only shows up on the books when that item is sold. Period cost shows up on the income statement in the period it happens, full stop, whether one loaf or a thousand loaves went out the door.
In a Lagos company renting office space on Victoria Island, the monthly rent, the accountant's salary and the internet subscription are period costs. They land on the books every month regardless of how many contracts the company signs.
A Nigerian professional in Leeds sending money home to keep a family shop running should ask what portion of that money covers rent and staff wages, since those bills arrive every month whether the shop sells much or little. Knowing this helps everyone plan with open eyes instead of surprise.
A small Lagos textile firm pays ₦300,000 monthly rent and ₦450,000 in office salaries. These are period costs of ₦750,000 for that month, recorded as expenses regardless of whether the firm sold five hundred yards of fabric or none at all.
Questions people ask
What is the main difference between period cost and product cost?
Product cost attaches to the actual goods made and only appears on the income statement when those goods are sold. Period cost is tied to time itself and appears on the income statement in the period it occurs, whether anything was sold or not.
Are salaries always a period cost?
Not always. A factory worker's wage tied directly to production is usually a product cost. But an office manager's salary or an accountant's pay, unrelated to making the product, is a period cost.
Why does classifying a cost as period cost matter for a business owner?
It helps you see which expenses keep coming no matter what happens in sales, so you can plan cash flow properly and avoid nasty surprises when a slow month arrives.
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