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CMA Intermediate · Cost Accounting · Introduction to Cost Accounting

Which of the following is the most appropriate description of 'cost centre' in a cost accounting system?

A cost centre is a location, person or item of equipment for which costs are collected and later linked to cost units. A cost unit is the measure of output, and a profit centre also measures revenue, so those descriptions do not define a cost centre.

  1. AA location, person or item of equipment for which costs are collected and later related to cost unitsCorrect
  2. BA unit of product or service in relation to which costs are ascertained
  3. CA segment of the business for which both revenue and costs are measured to find its profit
  4. DA statement showing the total cost of all products for a period

Explanation

A cost centre is a location, person or equipment for which costs are accumulated. Option B describes a cost unit, and option C describes a profit centre. Option D describes a cost sheet, not a centre.

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