What is cost centre?

What is cost centre?


Cost centre is defined as a location, machine, person, department, division, or any equipment or group of these, in relation to which direct and indirect costs may be ascertained and used for the purpose of cost control. Thus, an organisation for the costing purposes is divided in convenient units and one of the convenient units is known as cost centre. Example: collecting, sorting, washing of clothes are the various activities which are separate cost centre in a laundry. The cost centre facilitates this function of cost control. Thus, correct identification of cost centre is a prerequisite for the successful implementation of cost accounting process. This also facilitates the fixation of responsibility in the correct manner.
Compare a) Impersonal and personal cost centres b) Production and service cost centres
Impersonal Cost Centre: consist items of impersonal nature like an equipment or location…
Define Direct cost and Indirect cost.
Direct Cost are all the expenses which can be identified with the individual product…
Explain fixed, variable and semi-variable costs.
Fixed Cost is the cost which remains constant ...Variable Cost is the cost which varies directly in proportion ...Semi-variable Cost is the cost which is neither fixed nor variable in nature
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