Cost Center
Cost center is unit of a business which only incur cost. It manager is only responsible for the costs it incurs and not responsible for any revenue generation or investment decisions.
Annually cost budget is allocated to the cost center and its performance is usually evaluated by comparing actual cost incurred V/S budgeted cost allocated to it. It is a duty of cost center manager to efficiently and effectively use its allocated budget.
Example:
- Marketing Department.
- Human Resource Department.
- Research and Development Department.
Profit Center
Profit Center is a unit of business which generate profits and also incur costs. Its manager is responsible for both costs and revenue generated by unit. Profit center is just like a running independent business
Its manager have full authority over decision making for product pricing and operating expenses.
Example:
A company have four divisions East, West, North, and South division, each division is profit center.
Example:
A company have four divisions East, West, North, and South division, each division is profit center.