Cost center cost driver

 · A cost center is a role or department that costs the business money but does not generate revenue on its own. They are often administrative, service and support roles. These positions cannot be eliminated to cut costs because they are vital to a smoothly operating organization. Cost centers can be individual roles, like janitors or human.  · Describe and Identify Cost Drivers. As you’ve learned, the most common bases for predetermined overhead are direct labor hours, direct labor dollars, or machine hours. Each of these costs is considered a cost driver because of the causal relationship between the base and the related costs: As the cost driver’s usage increases, the cost Author: Patty Graybeal, Mitchell Franklin, Dixon Cooper.  · A personal cost center is a cost center that consists of a person or group of persons (e.g., departmental foreman, salesman, supervisor, and factory manager). An impersonal cost center refers to a cost center that consists of a location, item of equipment, or a group of these (e.g., machines, departments, and vehicles).

The coherence between cost pools and cost objects is created by a link called a cost driver / activity. An activity is an action that draws on one or more resources, i.e. cost pools. This joining must not be confused with the activity term in the contribution margin model, where activity is an expression of the firm's output level. Operation Cost Centre: The cost center will be considered as the operation cost center if itconsist of the persons or the machines that follows similar type of activities in the company. Process Cost Centre: The cost center will be considered as the production cost center if it deals with any specific process or continuous sequence of the. A cost center is a business unit that is only responsible for the costs that it incurs. The manager of a cost center is not responsible for revenue generation or asset usage. The performance of a cost center is usually evaluated through the comparison of budgeted to actual costs. The costs incurred by a cost center may be aggregated into a cost.

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