Cost centre
A cost centre is a location, function or activity for which costs are collected and, in responsibility accounting, a unit whose manager is primarily accountable for costs. Its measures should reflect controllable spending, efficiency and service quality rather than requiring revenue the manager cannot influence. Production and service departments can both be cost centres. A cost centre is distinct from an individual cost unit or a profit centre.
Worked example
The maintenance department has a $100,000 budget and supports production. Assess its spending together with machine downtime and repair quality, rather than treating minimum cost as the only goal.
Common mistake
A cost-centre manager should not be blamed automatically for costs imposed by head office or for service demand outside their control.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| ACCA | PM | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |
