Resonsibility Center Paper

Resonsibility Center Paper - Running Head RESPONSIBILITY...

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Running Head: RESPONSIBILITY CENTER 1 Responsibility Center Sarah Jones ACC/220 5-23-2010 Robert Neely
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RESPONSIBILITY CENTER 2 Within every company there are three types of responsibility centers. These centers are cost centers, profit centers, and investment centers. Each center is responsible for its own parts of the company. This training session will discuss what each of the three centers are, what their responsibilities are, why they need their own budgets, and how each center uses incremental analysis to make decisions. Cost centers are responsibility centers that incur costs and expenses but don’t directly make money. These centers are usually the production departments or service departments. Production departments make the product, incurring expenses, but do not sell the product to gain revenue. For example, the production department would include such things as the installation of services in the customer’s home or work. The service departments are the support services within the company, such as maintenance and human resources. Cost centers are responsible for support services of the company and contributing to the making of the product to further be sold to generate revenue. Since cost centers incur costs and expenses it must have its own budget to follow to ensure proper spending and allocation of funds. Cost center managers are authorized to incur costs but are also evaluated on how well they are able to meet budgeted goals for controllable costs. Within cost centers incremental analysis is applied to many decisions.
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This note was uploaded on 12/12/2010 for the course ACC 220 taught by Professor - during the Spring '10 term at University of Phoenix.

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Resonsibility Center Paper - Running Head RESPONSIBILITY...

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