A Cost Element is determined by

A Cost Element is determined by

• A. The revenue produced by the asset.
• B. The cost of the resources expended to produce the asset.
• C. The market price of the asset.
• D. The depreciation method used.

Answer: (B)

Cost elements reflect the resources consumed to produce an asset. The element is determined by the actual inputs used—the costs of the resources expended, such as direct materials, direct labor, and overhead. Revenue from the asset is a result or outcome, not what was used to make it. The market price is an external value, not a production input. Depreciation method affects how cost is spread over time, not which resources were used. So, the cost element aligns with the resources used to create the asset. For example, the cost elements would include materials purchased, wages paid for production, and factory overhead.

Cost elements reflect the resources consumed to produce an asset. The element is determined by the actual inputs used—the costs of the resources expended, such as direct materials, direct labor, and overhead. Revenue from the asset is a result or outcome, not what was used to make it. The market price is an external value, not a production input. Depreciation method affects how cost is spread over time, not which resources were used. So, the cost element aligns with the resources used to create the asset. For example, the cost elements would include materials purchased, wages paid for production, and factory overhead.