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Word Count: 231
Cost centre - an identifiable part of an organisation for which costs can be calculated Examples include personnel and IT Departments which costs can be calculated do not create revenue and do not charge other departments for their services are included in this heading Profit centre - an identifiable part of an organisation for which costs revenue and therefore profit can be calculated Examples include a branch of a chain of stores or a specific product Sales are easy to calculate and it is possible to calculate costs and profit Why use costprofit centres - See which areas arent achieving - Set benchmarks - Middle manages can make more decisions To set up costprofit centres it must be possible to - Split the business into sectionsdepartments - Identify people to be responsible for the different departments - Set targets - Reviewmonitor in stages Disadvantages of cost profit centres - Difficult to allocate costs - Can cause extra stress pressure - Targets need to be achievable - Cheaper to buy items in bulk for whole company instead of per department A supplies department should be a cost centre for example as it provides a service for the other departments at no cost and does not generate an income A magazine section of a shop would be a profit centre as its sole purpose is to generate income
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