cost center

Cost center

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

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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.

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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.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.