Which center is most likely to be responsible for costs revenues and investments in assets?
Meaning Of Responsibility CentreA responsibility center is an operational unit or entity within an organization, that is responsible for all the activities and tasks structured for that unit. These centers have their own goal, staffs, objectives, policies and procedures, and financial reports. And are used to balance responsibilities related to expenses incurred, revenue generated, and funds invested to an individual. Show
In a multinational or large corporation, the organization tasks are divided into a subtask, and each task is given to various small division or groups. In this context, all groups in that organization are responsibility centers. Related links: What is a responsibility accounting? Types of Responsibility Centre:
Also add: What are the functions of management? The above mentioned is the concept, that is elucidated in detail about ‘Responsibility Centre’ for the Commerce students. To know more, stay tuned to BYJU’S. Do You Know? Q1. What is the 4 Ps of Marketing MIx? Answer: The 4 Ps of Marketing Mix are Product, Price, Place, and Promotion Q2. Who is known as the father of modern management theory? Answer: Henry Fayol is the father of modern management theory What are Responsibility Centers?Responsibility centers are categorized depending on the level of control over revenues, costs, or investments. Responsibility centers can be based on such attributes as sales regions, product lines, or services offered. The purpose of establishing responsibility centers within organizations is to hold managers responsible for only the assets, revenues, and costs they can control. The level of control a manager has over a segment’s assets, revenues, and costs will help determine the type of responsibility center used for each manager. What is a Cost Center?A cost center is an organizational segment that is responsible for costs, but not revenue or investments in assets. Service departments, such as accounting, marketing, computer support, and human resources, are cost centers. Managers of these departments are evaluated based on providing a certain level of services for the company at a reasonable cost. Production departments within a manufacturing firm are also treated as cost centers. Production managers are evaluated based on meeting cost budgets for producing a certain level of goods. What is a Profit Center?A profit center is an organizational segment that is responsible for costs and revenues (and therefore, profit), but not investments in assets. Managers of profit centers are responsible for revenues, costs, and resulting profits. Profit center determination must be made on a case-by-case basis, and it depends on the level of responsibility assigned to the store manager. Methods of performance evaluation for profit centers vary. Some organizations compare actual profit to budgeted profit. Others compare one profit center to another. Also, some organizations use segmented income statement ratios, such as gross margin or operating profit, to compare current profit center performance to prior periods and to other profit centers. What is an Investment Center?An investment center is an organizational segment that is responsible for costs, revenues, and investments in assets. Investment center managers have control over asset investment decisions. In many cases, investment centers are treated as stand-alone businesses. Several measures can be used to evaluate the performance of investment center managers, including segmented net income, ROI, RI, and economic value added (EVA). Related Topics
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What are profit centers responsible for?A profit center is a branch or division of a company that directly adds or is expected to add to the entire organization's bottom line. It is treated as a separate, standalone business, responsible for generating its revenues and earnings.
Which responsibility center generates revenue and cost?A profit center is an organizational segment in which a manager is responsible for both revenues and costs (such as a Starbucks store location).
What is cost center profit center and investment center?The Investment Center takes care of Revenues, Cost and Assets, while a Profit Center deals with revenues and costs and Cost Centers with costs only. This is a clear sign of how the span of control and span of accountability grow from Cost Centers to Investment ones.
Which responsibility center is held responsible for the use of assets as well as profits?The correct option is Investment center. It is an investment center which is one of the divisions of responsibility centers of an organization held accountable for managing and making the use of assets and capital in such an attractive way, through which an organization can generate higher revenues or incomes.
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