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

According to the basic concept used in cost accounting, 'cost' is best described as:

Cost is the monetary measurement of resources sacrificed or forgone to achieve a specific objective, such as making a product or providing a service. It is not merely cash paid, nor a selling price or market value, because cost relates to resources consumed for an objective.

  1. AThe amount of resources sacrificed or forgone to achieve a specific objectiveCorrect
  2. BThe selling price of a product less the profit margin of the firm
  3. CThe total amount of cash paid to suppliers during a financial year
  4. DThe market value of a product at the point of sale

Explanation

Cost is the measurement, in monetary terms, of resources sacrificed or forgone to achieve a specific objective such as producing a good or service. The selling price less margin is a pricing relationship, not the definition. Cash paid to suppliers is a payment concept and ignores non-cash resources.

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