Case Study

Case Study

Why would reclassifying period costs and product costs increase this period's reporting earnings?

In order to understand the reason of how reclassifying periodic cost as product cost can increase the earning of that particular year, it is essential to understand both the costs first. Periodic costs are not the essential part of manufacturing process, rather they are the costs related with the business' selling part or its administrative overheads. These costs are calculated as an expense of that particular year in which they occur. Whereas, the product cost are the direct costs associated with the product of the company i.e. ...