Costs that are capitalized because they are expected to have future value are called product costs; costs that are expensed are called period costs. This classification is important because it affects the amount of costs expensed in the income statement and the amount of costs assigned to inventory on the balance sheet. Product costs are commonly made up of direct materials, direct labor, and overhead. Period costs include selling and administrative expenses. A service company has which of the following costs

a. Direct Material
b. Overhead Costs
c. Product Costs
d. Expensed in the period incurred

b. Overhead Costs

d. Expensed in the period incurred

Explanation:

-Direct material refers to the cost of the material used to manufacture a product.

-Overhead costs are the costs related to the operation of the business and they can't be assigned to a good or service.

-Product Costs are the costs to manufacture a product.

-Expensed in the period incurred are the period costs which are costs not related to the production of a good.

According to these definitions, a service company has the following costs: overhead costs and expensed in the period incurred because these are costs that are not related to the creation of a product.

On the other hand, the other options direct material and product costs are not right because these costs are directly related to products.

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