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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cost, Cost Centre, Cost Unit and Cost Drivers

In a cost accounting system, a cost centre is best described as:

A cost centre is a location, person or item of equipment, or a group of these, for which costs are collected and ascertained. It is different from a cost unit, which measures output, and from a cost driver, which causes cost changes.

  1. AA location, person or item of equipment for which costs are collected and ascertainedCorrect
  2. BA unit of product or service in terms of which costs are expressed
  3. CA factor that causes a change in the cost of an activity
  4. DA statement showing total cost and profit for a period

Explanation

A cost centre is a location, person or equipment (or group) for which costs are accumulated. A cost unit is the measure of output, so the second option describes a different term. A cost driver is the cause of cost, and the last option describes a cost sheet.

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