A cost centre is a defined area or unit where direct and indirect costs are allocated, typically not generating profit but contributing to company expenses. It involves various classifications such as process, product, and service cost centres, along with categorization of costs into materials, labour, and overheads. The total cost is calculated from several components including prime cost, factory cost, and office cost, with distinctions between controllable and uncontrollable costs.

2. A defined area, machine or person to whom
direct and indirect cost are allocated. Also
known as Cost pool and Expense Centre.
It is a department within a company that does
not produce direct profit and adds to the
cost of running a company.
The manager and employers of a cost centre
are responsible for its costs but not
responsible for revenues or investment
decisions.

3.  Process Cost Centre
 Product Cost Centre
 Service Cost Centre
 Impersonal and Personal Cost Centre
 Operation Cost Centre

4. While preparing cost accounts, it becomes
necessary to select a unit with which
expenditure may be identified.
The quantity upon which cost can be
conveniently allocated is known as a unit of
cost or cost unit.
E.g. per person, per piece , per kg etc.

5. The elements can be classified in following
three parts:
 Material
 Labour
 Overheads

6. The substance or substances out of which a
thing is made.
It is principle substance or equipment that is
used in production for making the products.
It is the basic raw material for finished
goods. E.g. Cotton.
It is of 2 types:
 Direct material
 Indirect material

7. It is physical and mental effort used in
production. It is active factor. It is of two
types:
 Direct Labour
 Indirect Labour

8. Overheads means the expenses. It includes the
direct expenses and indirect expenses as
well. Its types are:
 Factory Overheads
 Administrative Overheads
 Selling and Distributive Overheads

9. The Total Cost is the sum of following
components:
 Prime cost
 Factory cost
 Office cost
 Total cost

10.  Behavioural Classification
 Functional Classification
 Controllable cost and Uncontrollable cost
 Direct cost and Indirect cost
 Product cost and Period cost
 Relevant cost and Irrelevant cost