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Explain and provide a business example for each responsibility center: cost center, profit center and investment...

Explain and provide a business example for each responsibility center: cost center, profit center and investment center.

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Cost Center:

Cost center isa part of an organization to which costs may be charged for accounting purposes. Typically, it incurs cost but indirectly contributes to revenue generation. Examples will be accounting department, legal department, research and development department, marketing and customer service department.

Profit Center

Profit center is a part of an organization with assignable revenues and costs and hence ascertainable profitability.It uses company resources to generate income. We can think of this as a segment that earns money or creates sales for the business. The best example will be Sales Department.

Investment Center

Investment center is a business unit that utilizes the capital Of the entity and do the investment. This helps in directly contributing to company's profitability. Its performance is evaluated on the basis of revenue it brings through investment in capital assets compared to overall expenses. The best example will be the financing arm of a departmental store and automobile maker.

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