31.1 The need for accurate cost information

Question 1

Cost center

Answer 1

The section of a business, such as a department or a product, that incurs the costs.

Question 2

Direct cost

Answer 2

These costs can be clearly identified with each unit of production and can be allocated to a cost centre.

Question 3

Indirect costs

Answer 3

Costs that cannot be identified with a unit of production or allocated accurately to a cost centre.

Question 4

Fixed costs

Answer 4

These do not change when the level of output changes, for example, the rent of a factory or shop.

Question 5

Variable costs

Answer 5

Costs that vary with the output.