Questions · Q6
Q.Distinguish between Cost Centre and Cost Unit.
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Start your 14-day free trial to unlock the full solution →| Basis | Cost Centre | Cost Unit |
|---|---|---|
| Meaning | A location, person, department, or item of equipment against which cost is collected | A unit of quantity of product/service/time in relation to which cost is expressed |
| Question answered | "Where is the cost incurred?" | "Cost of how much output?" |
| Examples | Machine shop, power house, works manager | Per tonne, per metre, per kWh, per passenger-km |
| Purpose | Enables collection of cost and fixing of responsibility, centre by centre | Enables the collected cost to be expressed in a comparable, per-unit form |
| Sequencing | Costs are collected by cost centre FIRST | Costs are then expressed per cost unit of that centre's output |
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