A cost centre is defined as:

A cost centre is defined as:

• A. A department that produces revenue.
• B. A function or location for which costs are ascertained.
• C. A unit of product.
• D. An external supplier.

Answer: (B)

In management accounting, a cost centre is any function or location where costs are accumulated and tracked for control. It doesn’t have to generate revenue—the focus is on recording and managing costs for that unit, so managers can monitor spending and efficiency. Examples include production departments, maintenance teams, or support functions like HR or IT. This differs from a unit of product, which is a cost object used to assign materials, labour, and overhead to a specific product. It also isn’t an external supplier, which lies outside the organization, and it isn’t a profit centre, which would be evaluated on both costs and revenues. So the idea is that a cost centre is the internal function or site where costs are identified and managed.

In management accounting, a cost centre is any function or location where costs are accumulated and tracked for control. It doesn’t have to generate revenue—the focus is on recording and managing costs for that unit, so managers can monitor spending and efficiency. Examples include production departments, maintenance teams, or support functions like HR or IT.

This differs from a unit of product, which is a cost object used to assign materials, labour, and overhead to a specific product. It also isn’t an external supplier, which lies outside the organization, and it isn’t a profit centre, which would be evaluated on both costs and revenues. So the idea is that a cost centre is the internal function or site where costs are identified and managed.