Skip to content

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

Sharma Engineering has a canteen that serves the production, assembly and packing departments. The canteen is best classified as which type of cost centre?

The canteen is a service cost centre because it provides support to the production, assembly and packing departments rather than processing the product itself. Its costs are apportioned to the production cost centres it serves.

  1. AProduction cost centre
  2. BService cost centreCorrect
  3. CPersonal cost centre
  4. DRevenue cost centre

Explanation

A service cost centre renders support to other departments and does not work directly on the product. The canteen serves production departments, so its cost is later apportioned to them. A production cost centre would be one where products are actually processed, such as assembly.

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.

Practise Cost, Cost Centre, Cost Unit and Cost DriversFree diagnostic mock

More Cost, Cost Centre, Cost Unit and Cost Drivers questions