Costing Principles: Cost Unit Versus Cost Centre
What is the difference between cost unit and cost center?
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A Cost Unit |
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Is the quantitative unit of product or service in relation to which costs can be ascertained.
Examples: Jobs, contracts, kilowatt hours, cost per patient day |
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A Cost Centre |
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Is “a location, person or item of equipment ( or group of these) in respect of which costs may be ascertained and related to cost units’
In a business, it is divided into sections called cost centre where costs are accumulated.
Example of Classification of Cost centre:
Production cost centre: - where production takes place like machining and assembling department.
Service Cost Centre: - which provides services to other cost centre like stores, production planning, store and maintenance.
Process Cost Centre: - where a specific process or a continuous sequence of operations take place like refining process.
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