QS Study

Cost center: A responsibility center in which a manager is responsible for costs incurred by the segment. The manager of a cost center has control over costs, but not over revenue or investment funds. It is a business unit that incurs expenses or costs but does not generate any revenue or money from selling goods and services for the company. Examples of cost centers include accounting, human resource, and IT departments. The head of a cost center will be responsible for costs only: not revenue or profits

Profit centers: A responsibility center in which a manager is responsible for the amount of profit earned. It is a department that incurs costs but also earns revenue by selling its goods and services to customers. The manager of a profit center has control met both cots and revenue. Managers of profit centers are evaluated on their ability to control costs as well as their ability to generate revenue and profits in their departments. Like a cost center manager, a profit center manager does not have control over investment funds. A profit center could be a subsidiary company, a department, a team, a production line, a project etc.

Investment center: A responsibility center in which a manager is responsible for in earning a rate of return on the segment investment in assets. The manager of an investment center has control over cost, revenue, and investments in operating assets. The managers of these divisions have control of the assets that the division purchases to help it generate revenue. The head of an investment center will be responsible for costs revenues and capital expenditure.