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Advantages, disadvantages of Cost Centre managers

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Your Company operates in 25 countries around the world and have diverse products, service and business portfolio.
Your are looking at ways to maximise profits for your company as a whole and as such, you are investigating different ways to measure the performance of individual managers who each have responsibility for one part of the portfolio.

What are the advantages and disadvantages of making individual managers either:

1) Cost Centre managers; or
2) Profit Centre managers.

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What are the advantages and disadvantages of making individual managers either a Cost Centre managers or Profit Centre Managers?

Your Company operates in 25 countries around the world and have diverse products, service and business portfolio.
Your are looking at ways to maximise profits for your company as a whole and as such you are investigating different ways to measure the performance of individual managers who each have responsibility for one part of the portfolio.

What are the advantages and disadvantages of making individual managers either:

1) Cost Centre managers; or
2) Profit Centre managers.

I will give the guidelines to understand the above concepts.

Firstly one must know the concept of responsibility center, as cost centre and profit centre are part of the responsibility center. As per answer.com, Responsibility centre is a "Unit in the organization that has control over costs, revenues, or investment funds. For accounting purposes, responsibility centers are classified as Cost Centers, Revenue Centers, Profit Centers, and Investment Centers. A well-designed responsibility accounting system should clearly define responsibility centers in order to collect and report revenue and cost information by areas of responsibility."

Thus, Responsibility centre is any unit which is accountable for its performance. The ...

Solution Summary

THis discusses the advantages, disadvantages of Cost Centre managers or Profit Centre managers

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