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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 l.jpg
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


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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


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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


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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)