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.