Essential to the effective operation of any Cost and Management Accounting syste

Question

Essential to the effective operation of any Cost and Management Accounting system in any business is the ability to define the cost units and cost centres.
You are required to:
a) Explain the term "cost unit" and illustrate your answer by reference to any businesses that you are familiar with.
b) Explain the term "cost centre" and describe how a company will use cost centres in a management accounting system.
c) Outline and explain the various works of the management accountant in a typical manufacturing company.

Explanation / Answer

a) Cost Unit : Cost unit is the unit of product or service for which cost is computed. Example in a bakery , cake might be the cost unit. b)Cost centre : A cost centre is a division that adds to the cost of an organization, but only indirectly adds to its profit. c)The various works of the management accountant in a typical manufacturing companyT To measure ,analyze and report financial and non financial information that helps managers make decisions to fulfil the goals of the organization. To evaluate performance and marketing decisions. To provide cost-benfit analysis of various decisions.

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