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Solved i need help calculating the Total Period Cost, Total

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total period cost formula

Use your profit and loss account for this and identify your total fixed costs. Rent expenses, salaries, insurance bills, equipment costs, and other business-related utilities are considered fixed costs. Both product costs and period costs may be either fixed or variable in nature. Product costs are often treated as inventory and are referred to as “inventoriable costs” because these costs are used to value the inventory.

The project winds up taking about 10 weeks longer than you originally anticipated, and the graphic designer logged 1,600 hours in total. High operating leverage can benefit companies since more profits are obtained from each incremental dollar of revenue generated beyond the break-even point. For example, a company executive’s base salary would be considered a fixed cost because the dollar amount owed by the company is outlined in an employment contract signed by the relevant parties.

How to Calculate the Cost of an Employee

Since COGS directly affects gross profit, manufacturers may prefer to use methods that return a lower COGS in order to report higher profits. If labor cost variance is negative, this indicates that your team is under producing, or the project scope is greater than anticipated. Additional training or better quality control measures can help you bring labor costs down.

The manufacturing facility manager’s salary is not a period expense since it is considered a manufacturing overhead cost. On the other hand, the administrative assistant’s salary is a period cost since she works in the office and not on the production floor. Finally, both executives’ salaries are period costs since they also do not work on the production floor.

Calculating Theoretical Plate Cost

Selling costs can vary somewhat with product sales levels, especially if sales commissions are a large part of this expenditure. For example, businesses that adopt average cost method need to continue to use this method for future accounting periods. This principle is in place for the ease of financial statement users so that figures on the financials can be compared year over year. Rent can be recorded as a period cost or a product cost, depending on the purpose of the facility.

total period cost formula

The location your employee resides in heavily impacts employee cost because labor legislation and cost of living vary between jurisdictions. For example, the statutory pension tax in Quebec in 2023 is 12.8% and applies to earnings between CA$3,500 law firm bookkeeping and CA$66,600 while the same tax elsewhere in Canada is 5.95% and applies to the same earnings range. Being largely dependent on the value of inventory items, the Cost of Goods Sold varies by which inventory valuation method a company uses.

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