Why is a Cost Center important for running business?

Last updated: 2023-01-25
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What are cost centers and companies need them? 

As a business grows, it gets into a situation where it has to track costs in different parts of the business. They can be organizational units, company locations, branches or otherwise defined parts of the company for which costs need to be monitored. The company defines cost centers for such parts and reasons.

  • company costs are allocated to a cost center
  • someone must be responsible for each cost center
  • cost resources such as property, equipment, buildings, or employees are assigned to a cost center