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Responsibility Centers: Revenue & Expenses AND Profit Centers

This document discusses responsibility centers and how they are used to measure revenue, expenses, and profits. It defines a responsibility center as an organizational unit headed by a manager responsible for its activities. Responsibility centers receive inputs like materials, labor, and services to produce outputs. Their performance is measured by efficiency, the ratio of outputs to inputs, and effectiveness at meeting objectives. There are four main types of responsibility centers: revenue centers, expense centers, profit centers, and investment centers. The document also briefly mentions other specific responsibility centers like administrative, support, research and development, and marketing centers.

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Pradeep Chintada
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262 views7 pages

Responsibility Centers: Revenue & Expenses AND Profit Centers

This document discusses responsibility centers and how they are used to measure revenue, expenses, and profits. It defines a responsibility center as an organizational unit headed by a manager responsible for its activities. Responsibility centers receive inputs like materials, labor, and services to produce outputs. Their performance is measured by efficiency, the ratio of outputs to inputs, and effectiveness at meeting objectives. There are four main types of responsibility centers: revenue centers, expense centers, profit centers, and investment centers. The document also briefly mentions other specific responsibility centers like administrative, support, research and development, and marketing centers.

Uploaded by

Pradeep Chintada
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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REVENUE & EXPENSES

AND
PROFIT CENTERS
Responsibility Centers
Responsibility Centers
Responsibility center is an organization unit that is
headed by a manager who is responsible for its
activities.
A company is a collection of responsibility centers.
Each responsibility centers have objectives.
Responsibility centers receive inputs, in the form of
materials, labor, and services and using working capital,
equipment and other assets, performs its particular
function with the ultimate objective of transforming its
inputs into outputs, either tangible or intangible.
Management is responsible for optimum relationship
between inputs and outputs.
Responsibility Centers
Measuring Inputs (resources) and Outputs (revenue/profit)
Cost is a monetary measure of the amount of resources used
by a responsibility center.
Efficiency and Effectiveness the two criteria for measuring
the performance of the responsibility centers.
Efficiency is the ratio of outputs to inputs, or the amount of
output per unit of input.
Effectiveness is determined by the relationship between a
responsibility centers output and its objectives.
Efficiency and effectiveness are not mutually exclusive; every
responsibility center ought to be both efficient and effective.
A responsibility center is efficient if it does things
right, and it is effective if it does the right things.
Types of Responsibility Centers
4
Four types of responsibility centers
Revenue Centers
Expense Centers
Profit Centers
Investment Centers




General Control Characteristics budget
preparation, cost variability, type of financial
control, measurement of performance
Administrative and Support centers
Research and Development centers
Marketing Centers
Other Responsibility Centers
End of
Session

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