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A fellow manager with little or no accounting background is having difficulty understanding two sets of accounting terms, variable and fixed costs, as opposed to period and product costs. He understands that variable costs change during an accounting period while fixed costs do not. However, he believes that a period cost implies that it is for a period of time and is, therefore, also fixed. He therefore states his assumption to you that all product costs are variable and all period costs are fixed. How do you help him out of his dilemma? How do you explain to him the errors of his logic?

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