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A cost unit is a unit of product, service or time in terms of which costs are ascertained or expressed. It is basically a unit of measurement like number (per1000 bricks), weight (per tonne of coal), length (per meter of cloth), volume (per litre of petrol), time (per kilowatt hours of power), area (per square foot of construction). Its selection depends on the nature and type of industry.
A Cost Centre is a location, person or item of equipment (or group of these) v for which costs may be ascertained and used for the purposes of cost control. In other words, a cost centre is a convenient unit of the organization for which cost may be ascertained.
A cost unit is said to be composite cost unit when two units are merged into one. For example:
Undertaking
Cost Unit
1. Passenger Transport
per passenger - km
2. Goods Transport
per tonne - km
3. Hotel
per room per day
4. Hospital
per bed per day
5. Electricity
per kilowatt hour
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Cost Unit can be defined as a unit of product or service in relation to which costs are ascertained.
For example, cost unit for a mobile telecommunication provider would be call minutes. Cost unit can be tangible and intangible in nature. Examples of tangible cost units are garments produced at apparel manufacturing firms, loaves of bread produced at bakeries, bars of soap produced by soap manufactures. However, to handle the large bulk of cost units and to make the cost control process easy companies can use large cost units such as1000 units of garments, a case of bread, box of bar soaps consisting of100 bar soaps. Intangible cost units does not have physical existence and examples of intangible cost units are number of complaints handled by a customer service department, number of accounting entries handled by an accounting department and number of client problems handled by business consultants.
A new cost unit is introduced, namely composite cost unit, comprises of two cost units.
For example, the composite cost unit student per academic program/semester in an academic institution represents two components in the cost unit (number of students and number of semesters/academic programs). This would gather the cost of serving a student based on the semesters they have enrolled with the academic institution.
Cost center is a division within a business, which is financed from the profit margin adding to the cost of the organization, but contributing to its profit indirectly. Typical examples include research and development, marketing and customer service.
Cost Unit is the basic unit of a product/service for which cost(s) could be calculated/ascertained, for e.g. liters of milk
Cost Center is anything, person/place/division, for which separate cost(s) could be calculated, for e.g. Human Resources department
Composite Cost Unit is merger of two cost units for e.g. for transport -per km per passenger
The cost unit is the unit of the product or service that the company produces. Fpr example, a car is a cost unit in a car factory.
The composite cost unit is more than one of the cost units (2 or more cars).
A cost center is a department or function in the car factory that comprises part of the cost of the car but not generates profits directly such as the painting department.
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