COST ACCOUNTING
PERFORMANCE MEASUREMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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units of product or service for which costs are ascertained
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amounts of expenditure attributable to various activities
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functions or locations for which costs are ascertained and related to cost units
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a section of an organisation for which budgets are prepared and control exercised
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Detailed explanation-1: -A cost centre is, “a production or service location, function, activity or item of equipment whose costs will be attributable to cost units”. A cost centre is the smallest organizational sub-divisional-unit for which we require separate cost collection.
Detailed explanation-2: -A cost unit is the measurement medium whereas a cost centre refers to a subdivision, location, department, or other institution. The marketing department, Research & Development department, and other cost centres are examples of cost centres. Metre, kilometre, gallon, and other cost units are examples of cost units.
Detailed explanation-3: -The main function of a cost center is to track expenses. A cost center manager is only responsible for keeping costs in line with the budget and does not bear any responsibility regarding revenue or investment decisions. Cost centers provide metrics more relevant to internal reporting.
Detailed explanation-4: -Unit cost is determined by combining the variable costs and fixed costs and dividing by the total number of units produced.
Detailed explanation-5: -Impersonal cost center Impersonal cost centers deal with equipment, machinery or locations. They may focus on locations, equipment, production or machines.