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CMA Final · Cost and Management Audit · Audit of Different Service Organisations

In auditing a educational institution run as a service organisation, which cost centre classification would most appropriately treat the library and computer laboratory?

The library and computer laboratory are best treated as service cost centres supporting the teaching departments. They do not earn primary tuition revenue or make goods, so their costs are collected and then apportioned to the academic departments they serve.

  1. AService cost centres supporting the teaching departmentsCorrect
  2. BProfit centres generating primary tuition revenue
  3. CProduction cost centres turning out finished goods
  4. DCapital work-in-progress accounts

Explanation

Library and computer laboratory support teaching departments and are not the primary revenue-generating activity, so they are service cost centres whose costs are apportioned to the departments. They do not produce goods, and they are not capital work-in-progress.

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