Cost Center

AAA

DEFINITION of 'Cost Center'

A department within an organization that does not directly add to profit, but which still costs an organization money to operate. Cost centers only contribute to a company's profitability indirectly, unlike a profit center which contributes to profitability directly through its actions. This type of department is likely to be one of the first targets for downsizing because, on the surface, it has a negative impact on profits.

INVESTOPEDIA EXPLAINS 'Cost Center'

Cost centers and profit centers are typically treated differently within an organization. Because a cost center doesn't produce a profit directly from its activities, managers of cost centers are responsible for keeping their costs in line or below budget. Examples of cost centers include marketing, human resources and research and development.

RELATED TERMS
  1. Reorganization

    A process designed to revive a financially troubled or bankrupt ...
  2. Restructuring

    A significant modification made to the debt, operations or structure ...
  3. Profit Center

    A branch or division of a company that is accounted for on a ...
  4. Downsize

    Reducing the size of a company by eliminating workers and/or ...
  5. Human Resources (HR)

    The company department charged with finding, screening, recruiting ...
  6. Marketing

    The activities of a company associated with buying and selling ...
Related Articles
  1. A Career Guide For Marketing Majors
    Professionals

    A Career Guide For Marketing Majors

  2. R&D Spending And Profitability: What's ...
    Investing

    R&D Spending And Profitability: What's ...

  3. How To Lay Off Staff
    Retirement

    How To Lay Off Staff

  4. The Ins and Outs Of In-Process R&D Expenses
    Investing

    The Ins and Outs Of In-Process R&D Expenses

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center