This document discusses different types of responsible centers in business organizations. It defines a responsible center as an area controlled by an individual manager. There are four main types: 1) Cost centers, where managers are responsible for costs but not revenues. 2) Revenue centers, where managers are responsible for generating sales but not costs. 3) Profit centers, where managers are responsible for both revenues and costs. 4) Investment centers, which are responsible for profits and investments, giving managers more authority over assets. Examples are given for each type to illustrate how performance is evaluated.

1. WHAT IS RESPONSIBLE CENTRE?
EXPLAIN THE TYPES OF RESPONSIBLE
CENTERS?

2. RESPONSIBLE CENTRE
Types of responsible centers

3. RESPONSIBLE CENTRE
Responsible 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