Question

Difference between cost centre and cost unit in cost accounting

Answer 1

hey mate here is your answer

Cost Center

Cost center is one or more units in a business organization that add to the overall cost of the organization, and also add to profits of the organization, though these profits are hard to calculate and quantify. For example, many companies have a separate research and development center that incurs lots of costs in its endeavor to come up with new products for the company, though it is difficult to say how much profit it generates for the company. The same can be said about the marketing department of a company that spends a lot on promoting the company and adds to the overall cost of the company. But, no company can say with certainty how much profit it has been able to make because of the efforts of its marketing department.

Cost Unit

Cost unit, on the other hand is a unit in finance or administration departments of a company. This is the unit that is involved in tracking costs incurred in various departments of the company. Cost unit is actually making estimates and suggests measures to save on costs of various projects and products inside a company. This is a very important part of a company as it lets the company know about costs incurred on various activities in comparison to profits generated by such activities.

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Answer 2

cost centre helps in calculation of costs of the overall structure of the business. It also helps in accounting for the overall profits of the business. cost unit on the other hand calculates the costs incurred in each department unlike cost centre it only does not affect the overall structure of the company.

JF