Responsible centre.ppt

Responsible centers in a business organisation by mangers

1. What is responsible centre? Explain the types of responsible centers?

2. Responsible centre Types of responsible centers

3. Responsible Centre R esponsible center may defined as an area of responsibility which is controlled by an individual . A responsible center is an activity such as department over which a manager exercises responsibility .responsible areas my be of departments , product lines , territories or any other type of identifiable unit or combination of units.

4. Types of responsible centers The following are the various types of responsible centers . They are: 1.Cost center 2.Revenue center 3.Profit center 4.Investment center

5. 1.Cost center A cost or expense center is a segment of an organization in which the managers are responsible for the cost incurred in that segment but not the revenues. Responsibility in a cost center is restricted to cost. Cost center managers have control over some or all of the costs in their segment of business ,but not over revenues.

6. 1.Cost center If the cost is less than the estimated cost that the manager should be responsible other wise irresponsible. example: Actual cost Standard cost variance 11000 10000 +1000(A) 9000 10000 -1000(F)

7. 2.Revenue center Revenue center is a segment of organization which is primarily responsible for generating the sales revenue. Revenue center manager does not have any control over the cost. Investment in assets , but usually has control over some of the marketing department. The performance of a revenue center is evaluated by comparing the actual revenue with budgeted revenue and actual marketing expenses with budgeted marketing expenses .

8. 2.Revenue center example: Actual revenue Budgeted revenue Variance 11000 10000 +1000(F) 9000 10000 -1000(A)

9. 3.Profit center Profit center is a segment of an organization whose manger is responsible for both revenues and costs. Managers of profit centers have control over both costs and revenues. A division of the company which produces and markets the products may be called as profit center.

10. 3.Profit center The performance of the profit center is evaluated in terms of whether the center has achieved its budgeted profit. Example: Actual profit Budgeted profit Variance 100000 80000 +20000(F) 80000 100000 -20000(A)

11. 4.Investment center An investment center is responsible for both profits and investments. The investment center manger has control over the amounts invested in the center’s asset. The manager of an investment center has more authority and responsibility than the manager of either a cost center or a profit center.

12. 4.Investment center Besides controlling costs and revenues, has investment responsibility too. Investment on asset responsibility means the authority to buy , sell and use divisional assets.

13. Thanking you