A
department or other section of a company where managers are directly
responsible for cost. For example, consider a company that has a manufacturing
department, a research and development departments, and a payroll department,
each department could be a cost centre and the director of each department
would be responsible to keep cost to as low a level as possible. The company
thus accounts for each cost centre separately which allows managers to take
immediate responsibility for cost growth and credit for cost cutting. Examples
of cost centres are departments of an organisation – finance, manufacturing,
marketing, e.t.c.
department or other section of a company where managers are directly
responsible for cost. For example, consider a company that has a manufacturing
department, a research and development departments, and a payroll department,
each department could be a cost centre and the director of each department
would be responsible to keep cost to as low a level as possible. The company
thus accounts for each cost centre separately which allows managers to take
immediate responsibility for cost growth and credit for cost cutting. Examples
of cost centres are departments of an organisation – finance, manufacturing,
marketing, e.t.c.
Classification
of Cost Centres
of Cost Centres
Cost
centres are classified into the following;
centres are classified into the following;
1.) Production Cost Centre: Where
production takes place like machining and assembling department.
production takes place like machining and assembling department.
2.) Service Cost Centre: Which
provides service to other cost centre like stores, production planning, store
and maintenance.
provides service to other cost centre like stores, production planning, store
and maintenance.
3.) Process Cost Centre: This is
where a specific process or a continuous sequence of operations take place like
refining process.
where a specific process or a continuous sequence of operations take place like
refining process.