chapter  8
18 Pages

RESPONSIBILITY ACCOUNTING AND COST CONTROL THROUGH STANDARD COSTS

A well-designed responsibility accounting system establishes responsibility centers within the organization. A responsibility center is defined as a unit in the organization which has control over costs, revenues, and/or investment funds. Responsibility centers can be one of the following types:

Cost Center A cost center is the unit within the organization which is responsible only for costs. Examples include production and maintenance departments of a manufacturing company. Variance analysis based on standard costs and flexible budgets would be a typical performance measure of a cost center.