What is a Cost Element?

A cost element is the cost of a resource that is consumed by an activity. The concept is used in activity-based costing. By tracking the costs associated with cost elements, you can significantly increase the quality of your cost analyses.

Examples of Cost Elements

Here are several examples of cost elements:

Raw materials, which are consumed during the production of a product.
Production supplies, which are consumed during the production process.
Labor costs, which are consumed during the manufacturing process.
Distribution expenses, which are consumed while transporting goods to customers.