A responsibility center is an organizational unit headed by a manager, who is responsible for its activities and results.[1] In responsibility accounting, revenues and cost information are collected and reported on by responsibility centers.[2]
A profit center is characterized by the responsibility to choose inputs and outputs with a fixed level of investment.
Performance evaluationedit
A typical measurement for profit center management is the ability to maximize profits as they are responsible for both costs and revenues.
Cost centeredit
A cost center is characterized by the lowest level of responsibility compared to the other two centers. Cost center managers are expected to produce as much output with a fixed amount of resources/input and to reduce costs.
Performance evaluationedit
Managers are generally evaluated based on cost control and reduction as they have no delegation to increase sales generation.
Investment centeredit
An investment center has the highest level of delegated autonomy. Investment center's have the highest level of autonomy as they can determine the level of inputs, outputs and additional investments.
Performance evaluationedit
The most common metric for evaluating management performance is the return on investment (ROI). The unit can be held responsible for generating an adequate ROI as the business unit has the autonomy to determine the key influencing variables.
Referencesedit
^Anthony, R.The Management Control Function, Boston, HBS, 1988, p.64.
^Jae K. Shim; Joel G. Siegel, Budgeting Basics and Beyond, John Wiley & Sons, ISBN978-0-470-38968-3
^Melumad, Nahum, Dilip Mookherjee, and Stefan Reichelstein. "A theory of responsibility centers." Journal of Accounting and Economics 15.4 (1992): 445-484.
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responsibility, center, responsibility, center, organizational, unit, headed, manager, responsible, activities, results, responsibility, accounting, revenues, cost, information, collected, reported, responsibility, centers, typical, examples, responsibility, c. A responsibility center is an organizational unit headed by a manager who is responsible for its activities and results 1 In responsibility accounting revenues and cost information are collected and reported on by responsibility centers 2 Typical examples of responsibility centers are the profit center 3 cost center and the investment center Contents 1 Profit center 1 1 Performance evaluation 2 Cost center 2 1 Performance evaluation 3 Investment center 3 1 Performance evaluation 4 ReferencesProfit center editMain article Profit center A profit center is characterized by the responsibility to choose inputs and outputs with a fixed level of investment Performance evaluation edit A typical measurement for profit center management is the ability to maximize profits as they are responsible for both costs and revenues Cost center editA cost center is characterized by the lowest level of responsibility compared to the other two centers Cost center managers are expected to produce as much output with a fixed amount of resources input and to reduce costs Performance evaluation edit Managers are generally evaluated based on cost control and reduction as they have no delegation to increase sales generation Investment center editAn investment center has the highest level of delegated autonomy Investment center s have the highest level of autonomy as they can determine the level of inputs outputs and additional investments Performance evaluation edit The most common metric for evaluating management performance is the return on investment ROI The unit can be held responsible for generating an adequate ROI as the business unit has the autonomy to determine the key influencing variables References edit Anthony R The Management Control Function Boston HBS 1988 p 64 Jae K Shim Joel G Siegel Budgeting Basics and Beyond John Wiley amp Sons ISBN 978 0 470 38968 3 Melumad Nahum Dilip Mookherjee and Stefan Reichelstein A theory of responsibility centers Journal of Accounting and Economics 15 4 1992 445 484 nbsp This accounting related article is a stub You can help Wikipedia by expanding it vte Retrieved from https en wikipedia org w index php title Responsibility center amp oldid 1072073879, wikipedia, wiki, book, books, library,
