Essay About Cost Unit And Cost Centre

Cost Unit and Cost Centre
(C) Distinguish between, and provide an illustration of what constitute a “cost unit” and a             “cost centre”           Cost Unit is a unit of product or service produced by the company in relation to which costs are ascertained and expressed. cost unit defined as standard of measure unit of goods manufacturing.  It is based on the type of industries, production purpose, and information available. A business classify cost unit in manufacturing and non-manufacturing. Its objective is to analysis, determine and distinguish cost of production which can be control the efficiency and effectiveness of labor. For example, in a printing firm producing books, each book is counted as a cost unit.Cost CentreA cost centre is a location, function or items of equipment in respect of which costs may be ascertained and related to cost units for control purposes.Cost centre are part of the organisation structure of the business.Cost centre is a “ collecting place” for costs.Brief, we can identify various department in a company can be defined as cost centre. For example, A printing firm has printing presses costing Rm 2 each, machine is the cost centre.CombineCost is an expenditure incurred for a specific product or activity and charge charged to a cost centre only when it can’t be charged to the product.For example, take two costs incurred in a workshop of a garage, the wages of a mechanic working on customers cars and the cost of electricity used for powering workshop tools and lighting.The wages of the mechanic can be identified with cost units provided a record is kept of how much time has been spent, e.g. by each repair or service job, but it is not practical to record the electricity attributable to specific jobs. This cost should be allocated to the cost of running the workshop which is cost centre. Cost unit collect direct cost whereas cost centre collect indirect cost. Finally, production cost is computed by adding cost unit and cost centre.