Question

Which statement is not correct?

a. cost objects are the reasons for performing activities
b. cost object describes the work performed in a firm
c. activities cause costs
d. cost objects create a demand for activities

Answer 1

The incorrect statement is that cost objects describe the work performed in a firm. Instead, cost objects are items for which costs are measured, such as products or projects.

Step-by-step explanation:

The statement that is not correct is: b. cost object describes the work performed in a firm. This statement is inaccurate as cost objects do not describe the work itself but rather are items for which costs are measured and assigned. For example, a cost object can be a product, service, project, or customer to which costs are allocated. The correct statements are: a. cost objects are the reasons for performing activities, indicating that activities are undertaken to produce or support the cost objects, c. activities cause costs, implying that costs are incurred as a result of performing activities, and d. cost objects create a demand for activities, meaning that cost objects require activities to be carried out that in turn, incur costs.

The incorrect statement is "b. cost object describes the work performed in a firm." In fact, cost objects do not describe the work itself but are entities for which costs are measured and assigned. Instead, they represent items like products, services, projects, or customers to which costs are allocated. The accurate statements are: "a. cost objects are the reasons for performing activities," signifying that activities are undertaken to produce or support the cost objects; "c. activities cause costs," indicating that costs are incurred due to the performance of activities; and "d. cost objects create a demand for activities," meaning that cost objects necessitate the execution of activities, which in turn, result in associated costs. Understanding these relationships is crucial in cost accounting for effectively measuring and managing costs in various organizational contexts.

Answer 2

The incorrect statement is that a cost object describes the work performed in a firm; instead, it is a point of reference for measuring costs of activities aimed at producing goods or services.

Step-by-step explanation:

A cost object is anything for which a separate measurement of costs is desired. It could be a product, a service, a project, a customer, or any other part of an organization that managers seek to direct and control costs. In managerial accounting, cost objects do not describe the work itself but act as a point of reference for accumulating and measuring the costs of activities undertaken to produce goods or services.

Activities, on the other hand, are the various processes or operations that consume resources, and they cause costs because they involve the use of materials, labor, or overhead. It's through these activities that the product or service is developed, which creates a demand for activities. Therefore, activities are linked to cost objects in that the latter is the reason for performing the former.