cost center


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Cost center

Any division, department, or subsidiary of a company that has expenses but is not directly producing revenues.

Cost Center

A department or other section of a company where managers are directly responsible for costs. For example, consider a company that has a manufacturing department, a research and development department, and a payroll department. Each department could be a cost center, and the directors of each department would be responsible to keep costs to as low a level as possible. The company thus accounts for each cost center separately, which allows managers to take immediate responsibility for cost growth and credit for cost cutting.

cost center

A segment of a business or other organization in which costs can be segregated, with the head of that segment being held accountable for expenses. Cost centers are established in large organizations to identify responsibility and to control costs.
References in periodicals archive ?
The organizational chart includes total uses budget, general fund contribution (GFC), and fulltime equivalent (FTE) employees at the department level, and then cascades down through the cost center structure (division, subdivision, and program).
Managerial accounting influences the decisions of management regarding strategies from the beginning, cost type accounting and primary cost centers that determine a low price as possible, secondary cost centers influence the differentiation using IT and HR, to the end by profitability management that shows how successful a management strategy is.
Differences in cost center practices between Germany and the United States can be divided into four categories: differences in the definition of a cost center, differences in output and activity measures used in the cost centers, differences in the way in which costs are classified in cost centers, and differences in the responsibilities assigned to the heads of cost centers.
In addition, under a common approach to cost accounting in Germany known as Grenzplankostenrechnung (GPK), the manager of a cost center typically has a much narrower responsibility than the manager of a U.
Cost center accounting with reference to a high number of cost centers is a distinguishing characteristic of German cost accounting, so expectations about the future development of this method are of interest.
Cost Center profile of the Glasgow Haskell compiler.
The total costs associated with a particular cost center include administrative wages including fringes, mechanics' wages including fringes, and operating costs (utilities, supplies, tools, data processing, purchasing fees, attorney fees) for a total cost.
Of course, generating accurate contribution margin statements is contingent upon accurate segmentation of variable and fixed costs at the cost center level.
These include using variable costing, separating variable and fixed costs for each cost center, transferring costs from support cost centers to primary cost centers while maintaining the distinction between fixed and variable costs, estimating consumption for each resource cost center, and using planned or standard costs for most costing purposes.
With this information the facility is prepared to define the cost centers and develop the total cost of providing each service.
If the cost center actually realizes a cost savings of $115,000, the financial performance index earned is 4, which now can be combined with the above nonfinancial performance index of 4.
Distribution-intensive companies have been challenged to find technology to optimize inventories, which are often the single largest cost center," said Joseph Shamir, CEO of ToolsGroup.