What is a Cost Object?A cost object is any item for which costs are being separately measured. It is a key concept used in managing the costs of a business. Several types of cost objects are noted below. Show
Output-Related Cost ObjectsThe most common cost objects are a company's products and services, since it wants to know the cost of its output for profitability analysis and price setting. Operational Cost ObjectsA cost object can be within a company, such as a department, machining operation, production line, or process. For example, you could track the cost of designing a new product, or a customer service call, or of reworking a returned product. Business Relationship Cost ObjectsA cost object can be outside of a company - there may be a need to accumulate costs for a supplier or a customer, to determine the cost of dealing with that entity. Another variation on the concept is the cost of renewing a license with a government agency. Accounting for Cost ObjectsA cost object may be the subject of considerable ongoing scrutiny, but more commonly a company will only accumulate costs for it occasionally, to see if there has been any significant change since the last analysis. This is because most accounting systems are not designed to accumulate costs for specific cost objects, and so must be reconfigured to do so on a project basis. An annual review is common for many cost objects. If an analysis is especially complex, the review may be at an even longer interval. It may be necessary to have a cost object in order to derive pricing from a baseline cost, or to see if costs are reasonable, or to derive the full cost of a relationship with another entity.
What are the 4 types of cost?Costs are broadly classified into four types: fixed cost, variable cost, direct cost, and indirect cost.
What is the cost of a product?Product cost is an accounting term that refers to the total costs involved in making a product and getting it ready for sale. In manufacturing, product costs are expenditures that include the cost of raw materials, labor and manufacturing overhead.
Which process of cost involves computation of costs which has been incurred?Using the Process Costing Method
Process costing involves tracking the number of units passing through the production process during a given period, collecting cost information for each stage and then using the collected information to calculate per-unit cost.
What is cost object explain with example?A cost object is a term used primarily in cost accounting to describe something to which costs are assigned. Common examples of cost objects are: product lines, geographic territories, customers, departments or anything else for which management would like to quantify cost.
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