This is the total expense incurred on a specific on a specific item or an activity.
The Cost Unit
A cost unit is defined as a unit of product or service in relation to which costs are ascertained(measured). It could be anything which is measurable & useful for cost control purposes.
Eg:
- Mobile company - call seconds/call minutes
- Wisdom Business Academy - Per student
- Brick making - 1000 bricks/100 bricks/ 1 brick
A cost center is a production or service location, a function, an activity or an item of equipment, for which costs are accumulated. This is also called as a collecting place for cost.
Eg:
- production location - cutting department
- service location - a sales representative
- activity - quality controlling
- item if equipment
Once you identify the total cost collected at a cost center, then you can allocate the total cost collected in to cost units.
Cost Object
A cost object is anything for which costs can be ascertained or measured. Therefore all cost units & cost centers are types of cost objects.
Cost Object
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