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Cost Centres. A Cost Centre is a product, physical place (e.g. sales department) or person within a business that can be held responsible for certain expenses incurred in the runnnig of that business. Cost centres. The total costs in a business can be separated into the cost centres
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Cost Centres • A Cost Centre is a product, physical place (e.g. sales department) or person within a business that can be held responsible for certain expenses incurred in the runnnig of that business
Cost centres • The total costs in a business can be separated into the cost centres • This assists the management in: • Accounting for those expenses • Improving the control and decision making • It’s argued to improve staff motivation
Cost Centre - Analysis Some advantages • Successes and failures within different parts of the business more easily identified • Helps track problems and enables more effective decision making when cost reductions in the business are needed • Improves the quality of management decision making
Cost Centres – Analysis cont’d Weaknesses • This can create unnecessary work for some people in the business (I.e unproductive use of people resources) • There may be external factors why costs are increasing and causing poor performance in the cost centres (e.g. staff rates of pay)
