CMA Foundation · Fundamentals of Financial and Cost Accounting · Cost, Cost Centre, Cost Unit and Cost Drivers
Which statement about cost centres and cost units is correct?
Cost centres collect and accumulate costs, while cost units are the measures of output, such as per tonne or per kilometre, to which costs are related. They are different concepts and are used in both manufacturing and service industries.
- AA cost unit is always a department, whereas a cost centre is a product
- BCost centres are used to collect costs, and cost units are used to express the cost per unit of outputCorrect
- CCost centres and cost units are identical terms for a profit-making division
- DCost units exist only in service industries
Explanation
Cost centres are the points where costs are accumulated, while cost units are the units of product or service to which costs are finally related, such as per tonne or per kilometre. The other options confuse these roles.
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