A Note on Responsibility Centers

2 Pages Posted: 16 Jan 2018

See all articles by Luann J. Lynch

Luann J. Lynch

University of Virginia - Darden School of Business

Abstract

Organizational design is one of the basic building blocks of control, because it reflects the division of resources and the assignment of responsibility throughout the firm. In particular, each organizational unit headed by a manager can be considered a responsibility center.

Excerpt

UVA-C-2400

Dec. 13, 2017

A Note on Responsibility Centers

Organizational design is one of the basic building blocks of control, because it reflects the division of resources and the assignment of responsibility throughout the firm. In particular, each organizational unit headed by a manager can be considered a responsibility center. Responsibility centers include costs centers, revenue centers, profit centers, and investment centers.

Cost centers

Cost centers collect information on the resources used and compare those actual costs to the standards allowed for the level of goods produced or services rendered. With cost centers, no attempt is made to attribute revenue to them or to measure the value of the services provided in financial terms. Cost centers, however, do measure the amount of output or services produced. They either express the results in terms of cost per unit or compare actual costs with standard costs, or with some other measure of what should have been spent to generate that amount of output.

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Keywords: profit center, cost center, revenue center

Suggested Citation

Lynch, Luann J., A Note on Responsibility Centers. Darden Case No. UVA-C-2400, Available at SSRN: https://ssrn.com/abstract=3101104

Luann J. Lynch (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4721 (Phone)
434-243-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/lynch.htm

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