Cost Centres, Profit Centres, Investment Centres

Powerful Essays
The increasing complexity of today’s business environment makes it virtually impossible for most firms to be controlled centrally. Decentralisation is a necessary response to this increasing complexity and involves the delegation of decision-making responsibility by senior management to sub-ordinates. The structure is such that decision making is dispersed to various units within the organisation, with managers at various levels making key decisions relating to their centre of responsibility. These centres of organisational activity are known as responsibility centres and may be defined ‘as a unit of a firm where an individual manager is held responsible for the unit’s performance.’1

The performance of each centre and its manager is measured and controlled through a system of responsibility accounting which is based on the principles of locating responsibility and tracing costs/revenue/investments etc. to the individual managers who are primarily responsible. The division of the firm into separately identifiable units of responsibility allows for more accurate measurement of managerial performance because local information is more thorough. Overall, in order to obtain an accurate measurement of managerial performance, measures should be based on elements which the manager can control or significantly influence.

There are three main types of responsibility centre. A cost centre is the lowest level of responsibility, and performance is measured in terms of the costs incurred by it. Cost centres do not generate revenue and therefore have no profit objectives, which differentiates it from profit and investment centres. Managers of cost centres are accountable only for controllable costs and are not responsible for level of activity or long-term investment decisions. Managerial performance is measured by efficiency of operations in terms of the quantity of inputs used in producing a given output. The basis of this type of measurement lies in comparing

You May Also Find These Documents Helpful

  • Good Essays

    Flight Centre

    • 1107 Words
    • 4 Pages

    My work will be based on Flight Centre travel agent and I will be talking about their products and services, how they work, the importance of the technology for the company, how they advertise their services and about the company’s competitors. Flight Centre Travel Group is an Australian based international travel company, founded by Graham Turner in 1981. In 1982 they opened their first store in Sidney, today they have about 689 Flight Centre stores in Australia and about 2000 overseas stores across…

    • 1107 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    Flight Centre

    • 2183 Words
    • 9 Pages

    discovering key issues in pursuing future profitable growth. Furthermore, strategic solutions to their issues will be considered and a refined strategy proposed based on the analysis. Flight Centre’s strategic situation Industry definition Flight Centre describes itself as a global discount flight specialist. Taking into consideration the relative size of the Australian and international operations as well as the availability of information on global environment and competitive factors, for this…

    • 2183 Words
    • 9 Pages
    Powerful Essays
  • Better Essays

    Centre Of Gravity

    • 1019 Words
    • 4 Pages

    The Centre of Gravity & its relationship to the Application of Sports Massage Introduction Every object has a centre of gravity, which, when combined with other factors such as the line of gravity, enables an object to balance. If a person or object moves or changes shape, the centre of gravity will also move. This is important to remember when discussing sports massage as the therapist is constantly moving, making them vulnerable to being unbalanced or unstable. So to be able to conduct a safe…

    • 1019 Words
    • 4 Pages
    Better Essays
  • Good Essays

    Flight Centre

    • 705 Words
    • 3 Pages

    Flight Centre founded by Graham Turner in 1981. Flight Centres vision is ‘To be the world’s most exciting travel company, delivering an amazing experience to our people customers and partners. Well haven’t they achieved this, having won market global market share. Is an extremely successful company considering he started out with just one bus. In Australia alone Flight Centre has 1152 business units. These cover holidays, cruises, rail and flights. Turner was quite innovative in his management…

    • 705 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Centre of Arts

    • 687 Words
    • 3 Pages

    Strategy The strategy was selected because it appeals to an extensive range of target markets or audiences. The descriptive and vivid brochure attracts reader’s attention through an excellent Distribution channel. This major promotional item for “The Centre of Arts, Halo” in particular, is a visual brochure which makes it appealing to the distribution channels. These channels include the center’s Gold and Platinum members, the center’s database, internal mail,…

    • 687 Words
    • 3 Pages
    Satisfactory Essays
  • Best Essays

    Flight Centre

    • 1710 Words
    • 6 Pages

    the case study. This is further elaborated to list key challenges faced by Flight Centre. Based on the facts and key challenges alternative solutions have been provided in the second section. Final section of the report mentions the recommendations and implementations for the company to improve the current situation. Flight Centre is one of the largest and most successful travel booking agencies. First Flight Centre store was opened in 1982, the current number of stores in Australia is more than 680…

    • 1710 Words
    • 6 Pages
    Best Essays
  • Good Essays

    Assessment Centre

    • 1462 Words
    • 6 Pages

    1 What is an Assessment Centre? When I heard the term assessment centre for the first time I thought that it is a physical place and its purpose is performance assessment of employees of various organizations that visit assessment centres with such a need. In fact, assessment centre is a method, not a place or organization. It is a personnel selection method. Normally, assessment centre consists of a series of testing exercises. These exercises might be written, oral or job-situation simulations…

    • 1462 Words
    • 6 Pages
    Good Essays
  • Powerful Essays

    Cal Centre

    • 924 Words
    • 4 Pages

    CALL CENTER A call centre or call center is a centralised office used for the purpose of receiving or transmitting a large volume of requests by telephone. An inbound call centre is operated by a company to administer incoming product support or information inquiries from consumers. Outbound call centers are operated for telemarketing, solicitation of charitable or political donations and debt collection. In addition to a call centre, collective handling of letters, faxes, live chat, and e-mails…

    • 924 Words
    • 4 Pages
    Powerful Essays
  • Good Essays

    Detention Centres

    • 1259 Words
    • 6 Pages

    issue of Detention centres and whether or not there uses are necessary to protect our nation is a subject of great debate. This issue seems to fall into a moral grey area, as not having them would be morally wrong in that we would be letting anyone from anywhere into our country thus leaving unchecked entries of possible terrorists and other sorts of plausible threats. But having them still, at the same time, falls into this moral grey spot. The reason that these detention centres exist is because…

    • 1259 Words
    • 6 Pages
    Good Essays
  • Good Essays

    The Centre Lathe

    • 2498 Words
    • 8 Pages

    The Centre Lathe The Centre Lathe is used to manufacture cylindrical shapes from a range of materials including, steels and plastics. Many of the components that go together to make an engine work have been manufactured using lathes. These may be lathes operated directly by people or computer controlled lathes that have been programmed to carry out a particular task. A basic manual centre lathe is shown below. This type of lathe is controlled by a person turning the various handles on the top slide…

    • 2498 Words
    • 8 Pages
    Good Essays