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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cost, Cost Centre, Cost Unit and Cost Drivers

A firm is costing each of its customers separately to find which customers are profitable. Here the customer is best described as a:

The customer is a cost object, because the firm measures cost separately for each customer to judge profitability. It is not a responsibility centre with capital authority, nor a cost behaviour type such as fixed cost.

  1. ACost objectCorrect
  2. BCost centre only
  3. CResponsibility centre with capital authority
  4. DFixed cost

Explanation

Because cost is measured separately for each customer, the customer is the cost object. It is not a location or function for which a manager is responsible, and it is not a cost behaviour category.

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