direct material (DM), direct labor (DL) and manufacturing overhead (MOH) are considered components of product cost that eventually become part of inventory cost. Selling and administrative expenses are typically considered period costs that should be charged to expenses in the period in which those are incurred.

Now, what happens if a period cost is incorrectly classified as a product cost, and vice versa? What is affected, and how does that matter? [think about where these costs eventually end up and you will know the answer.]