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Determine the tyoes of Cost centre
Cost centre can be of two kinds:
1. Impersonal cost centre: consisting of a location or item of equipment (or group of these) like machine shop, and
2. Personal cost centre: consist of a person or a group of the persons such as factory manager, sales manager etc.
Cost centre also classified in manufacturing concerns into production and service cost centres. Production cost centres relate to those centres where production or manufacturing activities take place. Service cost centres are those, which are ancillary and render services to the production cost centres, so that manufacturing activities can take place. In a biscuit manufacturing company, making baking are the production cost centres will personnel purchase keeps canteen accounts and the service cost centres.
Transition probabilities These are the probabilities of moving from one state to another in the next time period. Usually they are written in the form of a probability matrix.
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