Question

Discuss the term cost object in the four level of indirect costs with in ABC system?

Answer 1

A cost object is anything for which a separate measurement of costs is desired. Examples include a product, a service, a project, a customer, a brand category, an activity, and a department.

Cost bearers are in the ABC terminology called cost objects. Examples of cost objects are customers, groups of customers, product groups, and orders. Thus the term is closely aligned to what is traditionally referred to as division of purpose. Like cost bearers, the cost objects can be half-manufactured products and products that are traded internally in the firm.

A prudent connection between the cost centers and cost bearers corresponds to the creation of a rational linkage between cost pools and cost objects. However, it is not meaning that the cost pools and cost objects are to be combined one by one, the cost pools are too broad for that. The specific cost pool is to be distributed to several cost objects, and thus ABC can be conceived through a refined distribution key, supposedly less arbitrary than the traditional models.