Cost Center


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.


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.

  1. Reorganization

    A process designed to revive a financially troubled or bankrupt ...
  2. Research And Development - R&D

    Investigative activities that a business chooses to conduct with ...
  3. Human Resources (HR)

    The company department charged with finding, screening, recruiting ...
  4. Downsize

    Reducing the size of a company by eliminating workers and/or ...
  5. Restructuring

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

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