Profit and Cost centres
A section of a business where costs are incurred and recorded.
What is a Cost centre?
Cost and profit centres help to hold specific business sections accountable.
The difference between the budgeted figure and the actual figure
What is Variance?
A section of a business where both costs and revenues are identified and recorded
What is a Profit centre?
Factors beyond the control of the business may affect specific cost and profit centres differently
What is an External factor?
A process that involves selecting a course of action from various possible alternatives with the aim of providing a solution to a given problem
What is Decision-making?
Examples include finance, production, marketing and human resources, where each department is a specific cost centre.
What is a department?
Comparing the performance in the various costs and profit centres in a business can help to find the areas that are most or least efficient
What is Benchmarking?
By setting targets, managers ensure that budget help to provide a sense of direction or purpose for organizations
What is planning?
A business producing several products could ensure that each product is a cost-centre
What is by-products/ product?
The pressure of managing a cost and profit centre may be very high for some staff.
What is Staff stress?
Budgetholders who are responsible for budgetary control feel empowered and trusted.
What is Motivation?
Businesses such as KFC or the Coca-Cola company are located in different parts of the world.
What is Location?
Staff and managers could consider the performance in their centres to be superior to the overall performance of the organization.
What is Centre conflicts?
Variance analysis aims to compare actual performances to budgeted performances
What is Comparison?