CMA Foundation · Fundamentals of Financial and Cost Accounting · Cost, Cost Centre, Cost Unit and Cost Drivers
A firm treats each of its three regional sales offices as a unit for which both revenue and cost are measured, with the manager answerable for the profit. Such a unit is properly called a:
Each regional sales office is a profit centre, since its manager is held responsible for both revenue and cost. A cost centre is accountable only for costs, while a cost unit measures output and a cost driver explains cost behaviour.
- AProfit centreCorrect
- BCost unit
- CImpersonal cost centre only
- DCost driver
Explanation
A profit centre is a segment whose manager is responsible for both costs and revenues. A cost centre is accountable for costs only. Because revenue is also measured here, the regional office goes beyond a cost centre.
Did you get it right without looking?
One question tells you little. A timed set on Cost, Cost Centre, Cost Unit and Cost Drivers shows your real accuracy, how long you take and where you lose marks.
More Cost, Cost Centre, Cost Unit and Cost Drivers questions
- Sharma Textiles has a stores department (service cost centre) with overhead of ₹60,000. It is apportioned to Weaving and Dyeing on the basis…
- Which of the following is correctly classified as a service cost centre in a manufacturing company?
- According to the basic concept used in cost accounting, 'cost' is best described as:
- A firm's cost accounting system records that a machine's depreciation of Rs 30,000 is charged to a product costing Rs 2,00,000 in materials.…
- Sharma Components Ltd has a set-up cost pool of Rs 3,60,000 for a period, and 120 set-ups are performed. Product Alpha needs 30 set-ups and …
- A goods transport company in Nagpur runs trucks that carried the following in a month: Truck A 10 tonnes over 200 km, Truck B 20 tonnes over…