Production cost centres are those which are:

Production cost centres are those which are:

• A. Administrative units with no production activities.
• B. Marketing-only units.
• C. External contractors.
• D. Actively involved in the production process.

Answer: (C)

A production cost centre is an internal unit where costs are incurred in the process of turning inputs into finished goods. It is the part of the organisation that is actively involved in the production activity, so the costs charged to it relate directly to manufacturing output. Administrative units with no production activities don’t accumulate production costs because they aren’t part of making the product. Marketing-focused units similarly don’t bear production costs; their costs relate to selling and promoting rather than manufacturing. External contractors operate outside the organisation; while you may pay them to perform production work, they aren’t internal cost centres within your firm. Their costs aren’t accumulated inside the company’s production cost centre structure. So the description that fits best is the unit actively involved in the production process.

A production cost centre is an internal unit where costs are incurred in the process of turning inputs into finished goods. It is the part of the organisation that is actively involved in the production activity, so the costs charged to it relate directly to manufacturing output.

Administrative units with no production activities don’t accumulate production costs because they aren’t part of making the product. Marketing-focused units similarly don’t bear production costs; their costs relate to selling and promoting rather than manufacturing. External contractors operate outside the organisation; while you may pay them to perform production work, they aren’t internal cost centres within your firm. Their costs aren’t accumulated inside the company’s production cost centre structure.

So the description that fits best is the unit actively involved in the production process.