Strathmore University can use various cost centres and cost units for cost estimation purposes within its cost accounting information system. i) Explain the distinction between a cost centre and a cost unit as used in cost accounting and give two examples of cost centres and two examples of cost units that Strathmore may use within its cost accounting information system
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Strathmore University can use various cost centres and cost units for cost estimation purposes
within its cost
i) Explain the distinction between a cost centre and a cost unit as used in cost accounting
and give two examples of cost centres and two examples of cost units that Strathmore may
use within its cost accounting information system
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