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. Research And Development - R&D

    Investigative activities that a business chooses to conduct with ...
  3. Restructuring

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

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

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

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

Hot Definitions
  1. Return On Sales - ROS

    A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". ...
  2. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  3. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  4. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  5. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  6. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
Trading Center