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Unformatted text preview: d the caveats discussed
earlier about the difficulty of making such comparisons.
Production Centers versus Service Centers. In a multi-cost-center structure, an organization's cost centers
generally are divided into two broad categories: production centers and service centers. Production centers, as the
name implies, are those that produce the organization’s products (or deliver its services). They sometimes are
called “mission centers” since they are considered to be representative of the organization's mission. In some
service organizations, they are called “revenue centers,” since they are the centers that charge for their services and
hence earn revenue.
Service centers, by contrast, contain the costs of those activities the organization carries out to support its production centers. In the above example, Administration would be considered a service center, while Mowing and
Special Projects would be production centers. In a larger setting, administration, institution-wide depreciation, personnel services, and plant maintenance are examples of activities that ordinarily would be service centers, while
manufacturing departments usually would be treated as production centers.
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- Spring '14