Final answer:
The incorrect statement is that a cost object describes the work performed in a firm. Instead, a cost object is an item for which costs are measured and assigned, and it creates a demand for activities, not the other way around.
Step-by-step explanation:
The statement that is not correct is: b. cost object describes the work performed in a firm. A cost object is not a description of the work performed but rather an item for which costs are measured and assigned. Examples of cost objects include products, services, projects, customers, and departments. On the other hand, activities performed within a firm do cause costs to be incurred, and cost objects indeed create a demand for activities because activities are undertaken to produce or serve the cost object in question.
It is essential to distinguish between cost objects and the activities that cause costs. For example, manufacturing a chair (the cost object) would require activities like cutting wood, assembling, and finishing. These activities incur costs such as material, labor, and overhead expenses. It is not the cost object that describes the work but the list of activities and resources allocated to produce the cost object.
Understanding the relationship between cost objects and activities is crucial for accurate cost allocation and management. By correctly tracing costs to cost objects, businesses can determine the profitability of different products or services and make informed decisions about where to focus resources for maximum efficiency and profitability.