Explain about cost centre, Managerial Accounting

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Explain about Cost centre:

Meaning & definition: cost centre is defined as a location, person or item of equipment (or group of them) in respect which costs may be ascertained and related to the cost units for the purpose for the purpose of the cost centre. It is the smallest segment of activity or area of responsibility for which the costs are accumulated.

According to CIMA, London, "a London person, or item of equipment (or group of these) for which costs might be ascertained and used for the purpose of the control".

Therefore, a cost centre refers to a section of the business to which costs can be charged. It may be a location (a department, a sales area) an item 'of equipment (a machine, a delivery van) a person (a salesman, a machine operator) or a group of these (two automatic machines operated by the one workman). The main purpose of ascertaining the cost of a cost centre is control of the cost.

 


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