What is the cost center?

The cost center is part of the company that increases the total cost of the organization, but does not directly create any profit. There are a number of divisions within the organization that can act as cost centers such as research and development, customer service and marketing. These cost center divisions do not directly create profits, so they are often some of the first divisions that suffer restrictions and layoffs. However, although they do not generate profit directly, they are often essential for the long -term profitability of the company, so their reduction can be harmful to the long -term health of society. For example, the Call Center Customer Services helps existing customers who have already paid for the company's products or services. Such a call center would contribute to the total cost of the company, but would not directly create sale.

However, the price of centers still contributes to the company's overall profit. Call Center Customer Service may not bring sale directly but to have a reputation as an excellent customer service can increase sales withPolečnosti. So even though the call center does not directly bring income, it facilitates the sales department, which is the profit center, to increase its income.

The same would be true for other divisions of joint costs within the company. Research and development can often be a very expensive cost center. Without this division, however, the company's products could stop, which will lead to lower sales. Similarly, even if marketing does not create direct income, without efficient marketing, it can be very difficult for the sales department to reach potential customers and persuade them to buy products and/or services of the company. Thus, Markedize Ting improves the overall profitability of the company.

If the company does not achieve its target earnings, the cost centers are often one of the first areas of the company that is experiencing restrictions. Many cost centers increase the profitability of society, but it can often be very difficult to measure overThe same time how the cost center increases the total profit. There are ways to measure the overall efficiency of the greatest cost, but it is often very difficult to correlate this efficiency with an increase in total income. For example, measurement of the call time at the Customer Service Center can provide metrics for the cost of the center and surveys can measure customer satisfaction, but it is difficult to determine how these measurements correlate with repetition of customers and oral advertising.