Question

Under the responsibility center management budget model, functional entities within a business have their own goals and objectives, dedicated staff, policies and procedures; do you think there are ways in which responsibility centers can negatively impact one another, or otherwise distort the financial goals of the college as a whole?

Answer 1

Large organisations often do have various responsibility centres to manage the functioning of such organisations.
Responsibility centres are given a certain kind of responsibility which is managed by its manager, have its own goals, own dedicated staff, procedures, policies and financial reports.

Generally, there are four types of responsibility. These are :-

• Profit Centre
• Cost Centre
• Revenue Centre

Investment Centre

These centres work accordingly and provide their support to the organisation.

Now, the question arises here is that do these responsibility centres can negatively impact one another.
Yes, they do. This is because if the cost Centre is not performing well, then it will surely impact the profit centre. And now is the profit Centre will not earn profits this may affect the investment centre.

Alternatively, negative impact of responsibility centres will lead to distortion of the financial goals of the college as a whole.