Question

A cost object is anything for which management desires a separate tracking of costs, while a cost driver is the factor that causes the cost object to increase or decrease.

a.True
b. False

Answer 1

The correct answer is True.

Step-by-step explanation:

This statement, a cost object is anything for which management desires a separate tracking of costs, while a cost driver is the factor that causes the cost object to increase or decrease, is correct.

These terms are mostly used in activity based costing (ABC) system.

Examples of Cost Object are material procurement costs, quality control costs, materal handling costs, line set up costs e.t.c.

Example of Cost drivers are number of purchase orders, number of inspections, numbers of set-ups e.t.c.