What are the differences between the cost object and the cost driver? give full example.

A cost object is something that can be assignned to . (example if we manufacturing cars,we would assign the cost of steering wheel to the final product -A cost driver is something that influence the expense of a certain business operations For example a steering wheel 's cost driver may be what material it's made out,it covers with leatherso it will be more costly to use than steering wheel

Anything, including product, service, process, activity or other for which costs should be determined and measured is a cost object. Therefore, the first step to determine the cost is to identify the cost object.

If cost is a function of a unit of activity or volume, then that activity or volume is the cost driver. This means that a change in the unit of that activity or volume, changes the cost. In the furniture manufacturing plant, cost drivers were the solid wood, where square feet is the cost driver, as well as plant lease, for which space is the cost driver. Now, if you have a tax accountant, for example, the cost driver might be his or her different activities; i.e. $50 for personal tax files, and $500 for business tax files, for example. For a real estate agent, however, the cost driver would be the price of the real estate sold, as their commission is in percentage of the total transaction price.

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A cost object or objective is any activity for which a separate measurement of costs is desired . If the user of management information wish to know the cost of something, this something is called a cost object. Examples include the following. The cost of a product, the cost of a service and the cost of operating a department.

A cost driver is any factor which causes a change in the cost of an activity , for example the quality of parts received by an activity is a determining factor in the work required by that activity and therefore affects the resources required.