Question

How do managers choose their Responsibility centers or how are managers assigned they Responsibility centers?

Answer 1

A fuctional entity created for the acheivement of established objectives in an organization by dedicated staffs, effective planning and procedure, financial reports etc. There are four kinds of responsibility centers-

Cost centers- Managers are reponsible for expenses and cost of the required segment. They don't have to check profit or revenue

Profit centers: In this, managers are responsible for cost and revenue both which lead to profit of that segment.

Investment centers:Here at this center, managers are responsible for profit as well as investment done in the center's assets

Revenue centers: Here, managers are responsible for sales revenue generation. They are not responsible for controlling cost but they can control expenses of marketing department.

Every responsibility center is to be headed by a manager and the manager has all the reponsibilities of the center's operations and output results.

According to the nature and segment of the different responsibility center, managers get assigned. Cost center manager is responsible for the cost and expenses incurred in that segment and not for the revenue generated. Managers assigned to profit center held responsible for cost and revenue and thus profit of that segment.So we can say that managers are assigned responsibility centers according to the requirement of that segment.