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Responsibility Center is a subdivision of a company. The authority and responsibility of responsibility center is given to a manager. Basically there are five different types of responsibility center- cost center, profit center, revenue center, contribution center and investment center. Types of Responsibility Center Assignment help provides basis knowledge and a depth idea about responsibility center and its different types.
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Different Types of Responsibility Center
There are five different types of Responsibility Center. These types explained in Types of Responsibility Center Assignment help are: –
- Cost Center: –
Cost center is one type of responsibility center where managers are responsible for cost sustained. Managers do not have revenue responsibilities. By comparing the actual amount with the standard amount the performance of the cost center is inspected. While judging the performance of such centers, it is very important to differentiate between controllable costs and uncontrollable costs. Cost center are not responsible or do not relate to revenues or objects and liabilities of an organization. Cost Center is explained in a detailed way in Types of Responsibility Center Assignment help.
- Revenue Center: –
Revenue center is one type of responsibility center which is responsible to raise revenue and has no role in production. The managers of such center are responsible to generate sale revenue. Comparison of actual revenue with budgeted revenue and actual marketing expenses with budgeted marketing expenses gives the performance of the revenue center. An example of revenue center is the marketing manager of a product line.
- Profit Center: –
Profit center is one type of responsibility center which is responsible for both revenue and costs. The goal of this center is to earn profit. The managers of profit center are responsible and have the authority to make decisions regarding both costs and revenues for the firm. Managers target to increase the production as well as marketing of the product. For example- A super market having different sections. In this center, performance is measured in terms of both expenses and revenues.
- Contribution Center: –
Contribution center is a type of responsibility center whose performance is measured by the contribution it earns. This center is solely responsible for increase of the contribution. Contribution refers to the difference between sales and variable costs. Managers of this center have the only responsibility to increase the contribution. It can be controlled by reducing variable costs and increasing sales.
- Investment Center: –
Investment Center is one type of responsibility center which is responsible for profits and investments. The manager of this center has control over expenses, revenues and the amounts invested. In Investment center, the manager has more responsibility and authority than the managers of any other centers i.e. Profit center and cost center. Performances of various people are evaluated by considering returns on investments.
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