Described the utilities of Cost center and types

Question

Accepted Answer

Cost centers are used to track and allocate expenses. There are two types: production and service.

Cost centers help in identifying and tracking expenses incurred by a particular department or function.
Production cost centers are those that are directly involved in the production process, such as manufacturing or assembly.
Service cost centers are those that provide support services to production cost centers, such as maintenance or quality control.
Cost centers help in allocating costs to products or services, which helps in determining their profitability.
Cost centers also help in identifying areas where cost reduction measures can be implemented.
Examples of cost centers include the production department, marketing department, and research and development department.

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