Cost object definition
/What is a Cost Object?
A cost object is an item for which a cost is compiled. For example, this can be a product, product line, service, project, customer, distribution channel, or activity. Cost objects are used in activity-based costing analyses as the focal point of cost accumulations. A close review of cost objects is also useful for managing costs throughout an organization. Cost objects are one of the primary targets of reporting within a managerial accounting system.
Examples of Cost Objects
Several common types of cost objects are as follows:
A specific product, such as a laptop computer.
A service, such as the cloud storage services offered by a tech company.
A project, such as the construction of a new corporate headquarters building.
A department, such as the accounting department within a company.
A customer, such as a large retail customer.
A production line, such as an assembly line that manufactures washing machines.
A marketing campaign, such as a social medial advertising initiative.
A business unit, such as the German division of an international consumer products company.
An event, such as a corporate trade show.
A contract, such as a long-term maintenance contract with a customer.
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FAQs
Can a Cost Object be Intangible?
A cost object can be intangible. Examples include services, software projects, research initiatives, or customer support functions—anything for which an organization wants to assign and track costs. Identifying intangible cost objects helps businesses assess the cost and value of non-physical activities critical to operations.