Responsibility center training
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There are four types of responsibility centers: cost centers, revenue centers, profit centers, and investment centers. Each center type has a specific role and accountability. Cost centers are accountable for meeting budgeted cost goals, revenue centers are responsible for meeting sales targets, profit centers are accountable for profitability, and investment centers are accountable for both profitability and return on invested funds. Managers of each center type use an individual budget and incremental analysis for decisions like accepting special orders, making or buying products, selling or further processing products, and changes to production or technology.
Responsibility center training
- 2. What is a responsibility center The four types of responsibility centers What each are accountable for Why each has their own budget What is Incremental analysis The decisions where incremental analysis would be used in each center.
- 3. The Responsibility is the unit in the organization that has control over costs, revenues, or investment funds. It is an organization unit for which a manager is made responsible. The center’s manager and supervisor establish specific and measurable goals for the responsibility center. The goals should promote the long-term interest of the organization.
- 4. There are four basic types of responsibility centers, These centers indicate the degree of responsibility the manager has for the performance of the center. 1. Cost centers 2. Revenue centers 3. Profit centers 4. Investment centers
- 5. Incremental analysis is described as the management’s decision-making process and approach. Some common types of decisions that involve incremental analysis’ are whether to: 1. Accept an order at a special price. 2. Make or buy component parts or finished products. 3. Sell products or process them further. 4. Changes in production and/or technology
- 6. A cost center is a type of center that incurs costs (and expenses) but does not directly generate revenues. Cost centers are accountable for meeting budgeted goals for controllable costs. This individual budget is used when the incremental decision to accept an order at a special price is used.
- 7. A Revenue Center is responsible for selling an agreed amount of products or services. It's manager is usually responsible to maximize revenue given the selling price (or quantity) and given the budget for personnel and expenses. This individual budget is used when the incremental decision to sell products or process them further is used.
- 8. A profit center is a type of center that incurs costs (and expenses) and also generates revenues. Profit centers are accountable for the profitability of their centers. This individual budget is used when the incremental decision to make or buy component parts or finished products is used.
- 9. An investment center is a type of center that incurs costs (and expenses) and generates revenues Investment centers are accountable for both the profitability of the center and the rate of return earned on the funds invested. This individual budget is used when the incremental decision to examine changes in production and/or technology is used.
- 10. Any questions?
Editor's Notes
- #2: This is the Responsibility Center Training Module
- #3: In this course you will learn;The three types of responsibility centers, what each are accountable for, why each has their own budget, and the kinds of decisions where incremental analysis would be used in each center.
- #4: The Responsibility is the unit in the organization that has control over costs, revenues, or investment funds. It is an organization unit for which a manager is made responsible. The center’s manager and supervisor establish specific and measurable goals for the responsibility center. The goals should promote the long-term interest of the organization.
- #5: There are four basic types of responsibility centers: cost centers, revenue centers, profit centers, and investment centers. These centers indicate the degree of responsibility the manager has for the performance of the center.
- #6: Incremental analysis is the management’s decision making process and approach. Each center uses Incremental Analysis to make decisions. Some common types of decisions that involve incremental analysis’ are whether to:Accept an order at a special price.Make or buy component parts or finished products.Sell products or process them further.Changes in production and/or technology
- #7: A cost center is a type of center thatincurs costs (and expenses) but does not directly generate revenues.They are accountable for meeting budgeted goals for controllable costs. This individual budget is used when the incremental decision to accept an order at a special price is used.
- #8: A Revenue Center is responsible for selling an agreed amount of products or services. It's manager is usually responsible to maximize revenue given the selling price (or quantity) and given the budget for personnel and expenses. This individual budget is used when the incremental decision to sell products or process them further is used.
- #9: A profit center is a type of center that incurs costs (and expenses) and also generates revenues.These centers are accountable for the profitability of their own centers. This individual budget is used when the incremental decision to make or buy component parts or finished products is used.
- #10: An investment center is a type of center that incurs costs (and expenses) and generates revenues These centers are accountable for both the profitability of the center and the rate of return earned on the funds invested. This individual budget is used when the incremental decision to examine changes in production and/or technology is used.