Cost

Cost is an amount that has to be paid or given up in order to get something. Cost is usually a monetary valuation of (1) effort, (2) material, (3) resources, (4) time and utilities consumed, (5) risks incurred, and (6) opportunity forgone in production and delivery of a good or service. All expenses are costs, but not all costs (such as those incurred in acquisition of an income-generating asset) are expenses.

Cost object
A cost object is a product produced by a company for which a separate measurement of cost is desired. A cost object can also be a project, a service, or a customer. Costs are allocated to the cost object and they are either direct or indirect costs. XYZ company produces a line of 10-speed bicycles which is a cost object in their product line.

Cost driver
Cost driver is any activity that causes a cost to be incurred.

A business engages in many different activities. The cost driver for an activity is the factor that influences the amount of the resources that will be consumed by a particular activity. A cost driver is designed to allocate the activity cost pool (or related costs) to the cost objects. The process of identifying a cost driver requires looking closely at the expense of producing a product and the effect that the driver has on that cost. When a cost driver is identified as an activity driver, the idea is to consider any factors that have some type of indirect impact on the cost for the activity.

Cost ascertainment
Cost accounting helps in ascertainment of cost after they are incurred. It also helps to ascertain the actual cost or estimated cost of a Job or product. Thus, the main objective of the cost accounting is to ascertain the cost of a product.

Cost unit
Cost unit is the unit of product or service for which cost is computed. In other words the quantity upon which cost can be conveniently allocated is known as a unit of cost or cost unit. It may be unit quantity of the product, services or time in relation to which costs are ascertained or expressed. Ordinarily cost unit is the expression in the form of count, weight, dimension etc. The main objective of cost accounting is to find out cost per unit of out put. It means the out put has to be measured in identifiable units in relation to which costs may be ascertained.

Cost centre:
A cost centre is a location, function or items of equipment in respect of which costs may be ascertained and related to cost units for control purposes. In other words it is defined as an accounting term that refers to a unit or organization for which costs are accumulated or computed.