An overview of cost, profit, revenue, and investment centers Cost classification in accounting also involves the allocation of costs, revenues and responsibilities to various centres or departments. These centres include: == Cost centres
== Revenue centres
== Profit centres
== Investment centres
A cost centre (CC) is a unit, location or department where cost data is collected. The purpose of the cost centre is to collect, analyze and ascertain costs in its immediate context. Cost centres usually have cost units—units or equipment for which costs are determinable or attributable. Overheads and direct costs constitute the cost structure of a CC. Since many activities in an organisation involve costs, a cost centre is a fundamental aspect, especially as profit and investment centres can be cost centres. According to the ACCA Study Text (Management accounting, c 1999), cost centres can manifest themselves as a project, a machine, department or overhead costs. One should note that a specific cost centre might not necessarily have other functions. CCs are not limited to production and manufacturing, since they can also be attributed to service centres, like commercial bank branches for example. Revenue Centres
These centres deal exclusively with revenue. Even though costs may arise from these areas, the revenue centre is not accountable for costs. Its purpose is primarily to maximise sales and revenue.
The profit centre addresses both costs and revenue. Therefore, the manager responsible for a profit centre is accountable for the purchases and sales for that unit, department or branch. Since both revenue and costs fall under the purview of the profit centre, it is both a cost and revenue centre, although a revenue centre is not a profit centre and a cost centre might not necessarily be a profit centre.
Investment centres are profit centres that are accountable for cost, revenues and net assets for capital...
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