A cost object is any entity or process that one wants to identify its cost.
Samples of cost objects are a product (e.g., grape juice), a service (e.g., storage), an activity (e.g., wild boar farming), an industrial unit (e.g., biodiesel plant), a commercial unit (e.g., convenience store), a process (e.g., fumigation), a sales operation (e.g., customer order), and so on.
In pricing, the most relevant cost objects are the sales object itself, the corporate contribution, and the sales operation, the two first remaining absorbed by the last, as illustrated in the following figure:
In manufacturers, the production activity generates the cost of the sales object itself, which is made of raw materials, labor, and general spending. Management activity gives rise to the corporate contribution, which include commercial, administrative, and financial expenses. The two costs, added together, result in the cost of the sales operation.
Finally, the cost of the sales operation compared to its revenue indicates its profitability. This profitability can refer to a single product, an order for several products, all sales to a customer, sales over a certain period, or sales of the entire business.
The costing methods are the same as those mentioned in another post: direct, absorption, and ABC.
When determining the cost of the sale object itself (the production cost or the cost of the product sold), one uses direct costing for raw materials and direct labor and absorption or ABC costing for indirect work and general spending. When calculating the corporate contribution, one uses direct costing for taxes, commissions, and other direct expenditures and absorption and ABC costing for indirect commercial, administrative, and financial expenses.
In addition to these three costing methods, many offerers calculate sales price using markup and contribution margin, which already have implicit intended profitability.
C. L. Eckhard, author of Pricing in Agribusiness: setting and managing prices for better sales margins.