Cost centre and cost unit

Brief Introduction of Cost Centre And Cost Unit and their types and element respectively. Related with Cost Accounting

1. Cost Centre and Cost Unit

2. Cost Centre A defined area, machine or person to whom direct and indirect cost are allocated. Also known as Cost pool and Expense Centre. It is a department within a company that does not produce direct profit and adds to the cost of running a company. The manager and employers of a cost centre are responsible for its costs but not responsible for revenues or investment decisions.

3. Types of Cost Centre Process Cost Centre Product Cost Centre Service Cost Centre Impersonal and Personal Cost Centre Operation Cost Centre

4. Cost Unit While preparing cost accounts, it becomes necessary to select a unit with which expenditure may be identified. The quantity upon which cost can be conveniently allocated is known as a unit of cost or cost unit. E.g. per person, per piece , per kg etc.

5. Elements of Cost The elements can be classified in following three parts: Material Labour Overheads

6. Material The substance or substances out of which a thing is made. It is principle substance or equipment that is used in production for making the products. It is the basic raw material for finished goods. E.g. Cotton. It is of 2 types: Direct material Indirect material

7. Labour It is physical and mental effort used in production. It is active factor. It is of two types: Direct Labour Indirect Labour

8. Overheads Overheads means the expenses. It includes the direct expenses and indirect expenses as well. Its types are: Factory Overheads Administrative Overheads Selling and Distributive Overheads

9. Components of Total Cost The Total Cost is the sum of following components: Prime cost Factory cost Office cost Total cost

10. Cost Classification Behavioural Classification Functional Classification Controllable cost and Uncontrollable cost Direct cost and Indirect cost Product cost and Period cost Relevant cost and Irrelevant cost