Control over the financial and

Responsibility Centre in Management control System


Ryszard Barnat, LLM., DBA, PhD (Strat. Mgmt)

A responsibility centre is an organizational subsystem charged with a well-defined mission and headed by a manager accountable for the performance of the centre. "Responsibility centres constitute the primary building blocks for management control." It is also the fundamental unit of analysis of a budget control system. A responsibility centre is an organization unit headed by a responsible manager.

There are four major types of responsibility centres: cost centres, revenues centres, profit centres and investment centres. Cost Centre A cost centre is a responsibility centre in which manager is held responsible for controlling cost inputs. There are two general types of cost centres: engineered expense centres and discretionary expense centres. Engineered costs are usually expressed as standard costs. A discretionary expense centre is a responsibility centre whose budgetary performance is based on achieving its goals by operating within predetermined expense constraints set through managerial judgement or discretion. Revenue Centre A revenue centre is a responsibility centre whose budgetary performance is measured primarily by its ability to generate a specified level of revenue. Profit Centre In a profit centre, the budget measures the difference between revenues and costs. Investment CentreAn investment centre is a responsibility centre whose budgetary performance is based on return on investment. The uses of responsibility centres depend to a great extent on the type of organization structure involved. Engineered cost centres, discretionary expense centre, and revenue centres are more often used with functional organization designs and with the function units in a matrix design.
In contrast, with a divisional organization designs, it is possible use profit centres because the large divisions in such a structure usually have control over both the expenses and the revenues associated with profits.


Share this article





Related Posts


System Management Controller
System Management Controller

Latest Posts
Integrator company
Integrator company
Organizations qualified by PCI SSC as…
Role Based Access Control System
Role Based Access…
Role-based access control (RBAC) is a…
System Center 2012 R2 App controller
System Center…
Microsoft System Center App Controller…
Systems Galaxy Access Control
Systems Galaxy…
All 635 2 Reader Controller Packages…
DTMF remote control system
DTMF remote control…
The project works on the concept of DTMF…
Search
Featured posts
  • System Management Controller
  • Mac System Management Controller
  • Access control Management System
  • Process of Management control Systems
  • What is Management control systems?
  • Apple System Management Controller
  • Types of control in Management control Systems
  • Scope of Management control System
  • Integrated project Management control System
Copyright © 2018 l www.oliver-control.com. All rights reserved.