businesses make cost centres and profit centres
Cost centre
- has responsibility for their own operational costs
- cost centres don’t make revenue, so their operations contribute to the overall costs to run a company
- INCLUDES
- administration
- customer service
- finance and accounts
- human resources
- legal
- marketing
- production
- purchasing
- research and development
- technical support
How to organize cost centres
- By function ⇒ i.e. HR, marketing and operations management, etc.
- By product ⇒ i.e. you’re Apple. You have cost centres in the production of iPhones, iMacs, Mac Pros, etc.
- By geography ⇒ i.e. for an MNC, cost centres in Canada
Profit centres
- make revenue and eat up revenue
- i.e. chain stores are profit centres: each store is responsible for their profits and losses
