This exercise continues the discussion from pages 396-397 (Cost accounting and cost objects: definitions) of the textbook and provides a further example to help you appreciate what cost accounting involves, how it works and how you are working with cost accounting data on a daily basis.

Your weekly routine involves expenditure on various different things. Thus you spend money on food, on drinks, on materials for each module on your course, on rent, on social activities and on sporting activities – among other things. Each of these items of expenditure is a cost object and your weekly expenditure can be allocated to each of these headings. At the end of the week, you will consider how much you have spent and what you have spent it on. If you had a budget for your weekly expenditure, you will look at the variances from expectations (your budget is your plan). Reality always differs from the original plan so variances arise and you will rationalise these variances by looking at what you bought compared to what you expected to buy. In this way you are working with cost accounting data in your daily life and using information on actual and expected spending to plan your future expenditure.