Identify and describe the five different responsibility centers, and provide one example of each

Answer 1

Cost Center: A responsibility center whose manager is accountable only for controllable costs that have well-defined relationships between the center's resources and products or services. Example: Ford Motor Company's Detroit assembly line

Discretionary Cost Center: A responsibility center whose manager is accountable for costs only and in which the relationship between resources and products or services produced is not well defined. Example: The Human Resources Department of Merck & Co.

Revenue Center: A responsibility center whose manager is accountable primarily for revenue and whose success is based on its ability to generate revenue. Example: Avis Car Rental's national reservation center

Profit Center: A responsibility center whose manager is accountable for both revenues and costs and for the resulting operating income. Example: The local Wal-Mart store

Investment Center: A responsibility center whose manager is accountable for profit generation and who can also make significant decisions about the resources the center uses. Example: The president of General Motors (The "company" is the investment center, and the president is the "manager.".)