What do cost centres refer to in a business context?

Cost centres are specific departments or segments within a business where costs can be tracked and attributed directly. This concept is crucial in managerial accounting as it allows organizations to understand where expenses are occurring and to analyze the efficiency of different parts of the business. By identifying cost centres, management can better manage and control expenses, making informed decisions to optimize overall performance.

In contrast, segments for revenue generation focus on areas that bring in income rather than incurring expenses, and departments where profit is maximized do not necessarily track costs in the same way as cost centres. Units that focus on customer satisfaction primarily concern themselves with meeting customer needs, which involves both costs and revenue considerations but do not specifically pertain to tracking expenses. Therefore, the description of cost centres as areas where costs can be directly attributed aligns perfectly with the definition and purpose of these accounting segments.