Responsibility Center

Responsibility Center
-Responsibility center is an entity, held
accountable for an activity/function under
consideration
Organization is a collection of responsibility
centers.
Each responsibility center has got certain
specific goal/purpose to meet. This specific task
becomes the objective of that responsibility
center.

10/17/08 hmahesh45@yahoo.com; VIM Pune 1

 Input – Output Relationship
Responsibility Center -
Input – Resources consumed by RC - Amount of
material, labor, and efforts etc used by RC to accomplish
certain task is called INPUT. It is usually expressed in
monetary terms.
Output – Results produced by RC such as finished
product, sales etc. It is usually difficult to ascertain.
Understanding Input Output relationship help in
performance evaluation of RC
The usual objective of any given responsibility centers is
to ensure optimum relationship between Input and
Output.
Some tasks may specify this optimality directly while
others may specify it indirectly.
(e.g. Raw Material – Production, Advertisements –Sales)

10/17/08 hmahesh45@yahoo.com; VIM Pune 2

 Input – Output Relationship

INPUT – RESPONSIBILITY OUTPUT–

Goods /TASK/WORK/OBJ.- Sales
/Services, To effect the sales effected or
Marketing of the Goods/ Revenues
expenses, sales Services earned
Personnel etc
Expressed in terms May be tangible
Responsibility Center /Intangible-
of COST
Intangibles pose
difficulty in
control

10/17/08 hmahesh45@yahoo.com; VIM Pune 3

 Input – Output Relationship
The input output relationship determines the
efficiency and effectiveness of the Responsibility center.
• Efficiency = OUTPUT/ INPUT
• One way to know efficiency is to compare inputs for given
level of output.
•Another is compare input with standards for given level of
output.
•Effectiveness of RC – Effectiveness emphasizes
relationship between RC’s output & RC’s goal.
(Compare RC’s output with goal) i.e. To what extent
RC has achieved its goal.
•Effectiveness is measured by comparing RC’s output
with the its goal/objective.

10/17/08 hmahesh45@yahoo.com; VIM Pune 4

 Input – Output Relationship

Input Output Time lag

Relationship between
I&O
Engineered Strong Short
Costs

Managed Weak Moderate

Costs

Capacity Costs Strong Long

10/17/08 hmahesh45@yahoo.com; VIM Pune 5

 Thanks ………..

10/17/08 hmahesh45@yahoo.com; VIM Pune 6