What is meant by Cost object?

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Cost object is anything in relation to which user of cost information wants to measure cost. It can be a product or collection of products or even a unit of product. It can be an activity. It can be a cost center i.e. a department responsible to incur cost. It can even be an instance of time when an outflow occurs. It can also be a contract of purchase, services or right to use a resource etc.

So again, cost object can be just anything for which cost assessment is intended.

Most of the time cost is ascertained for specific cost object to understand total outflow of resources required. It also helps in determining price as without knowing the actual cost price determination might be wrong.

Examples of cost object includes; cost of a single unit produced or cost of units produced a day or in a batch. Raw materials consumed is also an example of cost object and ascertaining cost of raw materials is one possible example. Production department or a service department providing services to production department are also examples of  cost object. Salary paid to a supervisor of such production department is also a cost object. Inspection activity carried out in the production department is also a cost object.

In short anything in relation to which outflow of resources can be related and measurement is intended that will be a cost object.

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