Chapter 1 - Responsibility Centres Flashcards
What is a responsibility centre ?
Responsibility centres are segments of a business for which a manager is accountable
What are four examples of responsibility centres ?
1) Cost centres
2) Profit centres
3) Revenue centres
4) Investment centres
Why do we need a cost centre ?
As well as charging costs to cost units they also need to be charged to a specific part of the business - in this specific case a cost centre
What are cost centres ?
They are segments of a business to which a cost can be charged
What do you cost centres enable ?
They enable segmented costs, which relate to a particular centre to be identified, and this assist with the control of the business
What are profit centres ?
Profit centres are segments of a business to which costs can be charged, revenue can be identified, and profits can be calculated
How does a profit centre work out the profit ?
Revenue ( sales of whatever the profit centre is managing ) - Costs ( whatever the profit centre has spent )
Why can many cost centres not become profit centres ?
Because most cost centres provide support services within a business or organisations so they would not have significant revenue
What is a revenue centre ?
Revenue centres are segments of a business where sales revenue from the product sold or service provided is measured
What is the responsibility of a manager in a revenue centre ?
The responsibility of the manager in a revenue centre is for the sales revenue generated
What are examples of a revenue centre ?
*Shop departments
*Restaurants
*Coffee shops
What is an investment centre ?
Investment centres are segments of a business where profit is compared with the amount of money invested in the centre
What is the calculation that an investment centre would use ?
Profit / investment = A
A x 100 = return on investment as a percentage
