The Difference Between Cost Centre and Cost Unit.
Cost centres are the smallest segment of activity or area of responsibility for which costs are accumulated or ascertained. I.C.M.A., England defines cost centre are the ‘allocation, person or item of equipment for which cost may be ascertained and used for the purpose of cost control’. Cost centres are the natural division of the organisation in to convenient units for the purpose of cost ascertainment and control. These are the department of the organisation, but sometimes a department may also contain several cost centres.
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Cost units is device for the purpose of breaking up cost in to smaller sub-divisions. I.C.M.A., England defines, cost unit is ‘a unit of quantity of product, service, or time in relation to which cost may be ascertained or expressed’. Ordinarily cost unit is the expression in the form of count, weight, dimension etc. Cost unit is the unit of measurement of different types of products. For example, ton in case or coal, Yards in case of cloth, Liter in case of petrol etc.