Cost centre
Cost centre is a responsibility unit whose manager controls spending on inputs but has no authority over selling prices or invested capital, and is evaluated purely against a cost budget.
Also known ascost center
FrameworkResponsibility accounting
See it move
A two-column comparison defines the boundaries of a cost centre manager's accountability. She controls direct labour, materials, and departmental overheads, each measured against a budget. She does not control selling price, sales volume, or capital assets, which are set or approved at a higher level; head-office allocations appear below the controlled-cost line and must not be used to evaluate her performance.
Check yourself
A manufacturing company's production department manager controls direct labour scheduling and raw-material usage but has no authority over the selling prices of finished goods or the capital assets the plant uses. What type of responsibility centre is this, and what is the primary measure for evaluating the manager's performance?