Page 13 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting
Notes
8 LOVELY PROFESSIONAL UNIVERSITY
The main kinds of cost centre are given below:
Operation and process cost centre,
Production and service cost centre, and
Personal and impersonal cost centre
These kinds of cost centre have been shown in the figure given as:
Figure 1.1: Cost Centres
Cost Centres
Operation and process Production and service Personal and
cost centre cost centre impersonal cost centre
1. Operation and Process Cost Centre: Operation cost centre consist of those machines which
carry out the same operation.
A process cost centre is a cost centre in which a specific process or a continuous process of
operation is carried out.
2. Production and Service Cost Centre: A production cost centre is one where actual
production process is carried out. The manufacturing and non-manufacturing costs are
charged to production cost centre.
A service cost centre is one which provides services to other cost centre. Only
non-manufacturing costs are charged to service cost centre.
3. Personal and Impersonal Cost Centre: Personal cost centre consists of a person or group of
persons. Personal cost centre follows the organisational structure of a factory or organisation.
Under this type of cost centre, costs are analysed and accumulated according to; say, factory
manager, sales manager, store keeper, etc. Impersonal cost centre consists of a location of
equipment. A cost centre relating to location may represent an area of sales, warehouse.
Cost centre relating to an item of equipment could be a machine or group of machines.
Whatever may be the kinds of cost centre, it is determined by taking into consideration the
following factors:
Responsibilities and accountabilities to be identifi ed,
Volume of work to be performed,
Uses of cost centres, and
Cost control activities exercised.
Self Assessment
Fill in the blanks:
12. A ...................... refers to a part of a factory for which costs are accumulated separately.
13. A ...................... is a cost centre in which a specific process or a continuous process of
operation is carried out.
14. The manufacturing and non-manufacturing costs are charged to ...................... cost centre.