A responsibility center in which a manager is responsible for both revenues and costs is a(n):

Definition of Responsibility Center

A responsibility center is a part or subunit of a company in which the manager has some degree of authority and responsibility. The company's detailed organization chart is a logical source for identifying responsibility centers. The most common responsibility centers are the numerous departments within a company.

Examples of Responsibility Centers

Responsibility centers are often categorized by the degree of authority and responsibility given to the manager:

• Cost centers. In a cost center the manager is responsible only for costs. Examples of cost centers include a production department, maintenance department, accounting department, human resource department, etc.
• Profit centers. In a profit center the manager is responsible for its costs and revenues. For example, a company may have a consumer products division and an industrial division to more effectively market the company's products. Each division's manager is responsible for sales and expenses. However, if the company's executive team makes all of the investment decisions, the divisions are considered to be profit centers.
• Investment centers. In an investment center the manager is responsible for investment decisions as well as costs and revenues. For instance, in a large corporation with many subsidiary companies, the corporation may give authority to the head of each subsidiary to make decisions on the needed investments. In that situation the manager is the head of an investment center.

Meaning Of Responsibility Centre

A responsibility center is an operational unit or entity within an organization, that is responsible for all the activities and tasks structured for that unit. These centers have their own goal, staffs, objectives, policies and procedures, and financial reports. And are used to balance responsibilities related to expenses incurred, revenue generated, and funds invested to an individual.

In a multinational or large corporation, the organization tasks are divided into a subtask, and each task is given to various small division or groups. In this context, all groups in that organization are responsibility centers.

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Types of Responsibility Centre:

• Cost Centre- A Cost Centre is a department or a unit which supervises, allocates, segregates, and eliminates all sorts of the cost related to a company. The cost center prime work is to check the cost of an organization and to limit the unwanted expenditure the company may acquire. The cost can be the determination of both person and location. In multinational companies, the cost center is authorized to decrease and manage the cost.
• Revenue Centre- This center is accountable for initiating and monitoring revenue. The management does not have any control over the cost or investment but can monitor a few of the expenses in the marketing section. The production of the revenue center is calculated by analyzing the budgeted revenue with actual revenue and actual marketing expenses with budgeted marketing expenses.
• Profit Centre-It is a division or department of a company which operates for the calculation of profit. In an organization, different profit centers are managed by the managers, who identifies profits on the basis of costs and incomes. Profit Centre is accountable for all the actions associated with the sales of goods and production.
• Investment Centre- This center is responsible for both investments and revenue. The investment manager can control expenses, income, the fund invested in assets, etc. He also has the authority to form a credit policy, which has an immediate impact on debt collection.

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The above mentioned is the concept, that is elucidated in detail about ‘Responsibility Centre’ for the Commerce students. To know more, stay tuned to BYJU’S.

Do You Know?

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Answer: The 4 Ps of Marketing Mix are Product, Price, Place, and Promotion

Q2. Who is known as the father of modern management theory?

Answer: Henry Fayol is the father of modern management theory