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Multiple Choice
Which of the following is considered a cost object in the context of inventory accounting?
A
A specific product line
B
The market interest rate
C
The company's total revenue
D
The general ledger account for cash
Verified step by step guidance
1
Understand the concept of a cost object: A cost object is anything for which costs are measured and assigned. In inventory accounting, this typically refers to items or activities directly related to the production or management of inventory.
Analyze the options provided: Evaluate each option to determine if it fits the definition of a cost object. A cost object should be something tangible or identifiable that costs can be traced to.
Option 1: 'A specific product line' - This is a tangible and identifiable entity within inventory accounting. Costs such as production, storage, and transportation can be directly assigned to a specific product line, making it a cost object.
Option 2: 'The market interest rate' - This is an external economic factor and not directly related to inventory accounting. It does not qualify as a cost object because costs cannot be assigned to it in the context of inventory.
Option 3: 'The company's total revenue' and Option 4: 'The general ledger account for cash' - Both are financial metrics or accounts, not tangible items or activities related to inventory. They do not meet the criteria for a cost object in inventory accounting.