Page 113 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes
Figure 5.6
Cost Centre

Product Centre Service Centre

Product centre is a centre at where the cost is ascertained for the product which passes through
the process.
Figure 5.7

Raw materials Cost centre Finished goods

Cost Ascertainment

Service centre is the centre or division which normally incurs direct or indirect costs but does
not work directly on products.

Example: Maintenance department

General factory office
Profit centre is a centre not only responsible for both revenue as well as expenses but also for the
profit of an activity.

Case Study
ATREJ Co Ltd. is a well-known small scale unit, manufacturing wooden furniture,
steel almirah since its inception in 1975. It is known as a well-established export-
Poriented company in manufacturing furnitures more specifically for developing
countries. The company has received an order from the Govt. of India through United
Nations Organization to meet the needs of rehabilitation of Indonesia. The firm is required
to supply the steel almirahs to meet the needs of Tsunami affected areas of Indonesia. The
production capacity of the firm per year is 10,000 steel almirahs.

Local Steel Material 5,00,000 Excise duty 1,00,000
Imports of sheet materials 50,000 Administrative office expenses 1,00,000
Direct labour in works 5,00,000 Salary of the managing director 30,000
Indirect labour in works 1,00,000 Salary of the joint managing 20,000
director
Storage of raw materials 25,000 Fees of Consultant 10,000
and spares
Fuel 75,000 Expenses of Promotion 80,000
Tools consumed 10,000 Selling expenses 90,000
Depreciation on plant 50,000 Sales depots 60,000
Co
Salaries of works 50,000 Packaging and distribution 60,000 ntd...
personnel

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