Cost center

Cost center,

Definition of Cost center:

  1. A cost center is a department or function within an organization that does not directly add to profit but still costs the organization money to operate. Cost centers only contribute to a company's profitability indirectly, unlike a profit center, which contributes to profitability directly through its actions. Managers of cost centers, such as human resources and accounting departments are responsible for keeping their costs in line or below budget.

  2. A defined area, machine, or person to whom direct and indirect costs are allocated.

  3. A distinctly identifiable department, division, or unit of an organization whose managers are responsible for all its associated costs and for ensuring adherence to its budgets. Also called cost pool or expense center. See also profit center and revenue center.

  4. A cost center indirectly contributes to a company’s profit through operational efficiency, customer service, or increasing product value. Cost centers help management utilize resources in smarter ways by having a greater understanding of how they are being used. Although cost centers contribute to revenue indirectly, it is impossible to discern the actual revenue generated. Any associated benefits or revenue-producing activities of these departments are disregarded for internal management purposes.

How to use Cost center in a sentence?

  1. I was informed to go over the the cost center and issue my complaint with them, which made me annoyed cause I had already waited so long.
  2. A cost center is a function within an organization that does not directly add to profit but still costs money to operate, such as the accounting, HR, or IT departments. .
  3. The main use of a cost center is to track actual expenses for comparison to budget.
  4. The manager for a cost center is only responsible for keeping costs in line with budget and does not bear any responsibility regarding revenue or investment decisions.
  5. A cost center indirectly contributes to a company’s profit via operational excellence, customer service, and enhanced product value.
  6. You will want to have a good relationship with your cost center so that you can trust the things that they will tell you.
  7. The cost center contacted the administrator to go over some accounting standards used during the normal day to day business processes.

Meaning of Cost center & Cost center Definition