Cost centers –directly attributable to product e.g.

product division

Responsibility center- org performance -what are the cost within the dept? e.g.

Managers is not only being measured based on performance. They also evaluated based on their
financial performance.

Internal audit dept (cost center)- they don’t bring profit to org but they can have internal profit.

Function: more on checking the process and improving the process – any cost savings or adjustment in
the process will be considered as income of the dept

Profit centers-responsible for both costs and revenues

Revenue center -only revenue generation

Investment center- capital investment -treasury department (assets, working capital they can make a
free cash- can be use anywhere.. they invest it)

Free Cash (they roll over – invest in highly liquid assets) Anything excess in working capital.

-BPI(deposit money to the bank- generate money through “loans”)

-but there are certain banks use the money of their creditors to buy portfolio e.g bonds, share of stocks

-overnight investments (deposit today-interest tomorrow-rollover)

Working Capital- funds they use for day to day

FA-

1. C- unit of product

2. B
Indirect cost-cost incurred not directly attributable to the product

Functional costs-

Admin cost- expense incur in the administrative in the business

Selling cost-expense incur in the sales

Distribution-expense (plant to warehouses on different location- not yet sold)

Financing cost-cost incur because of lack of capital(interest payable)

a. Indirect
b. Direct- it is for a certain product or one product. “directly attributable”
c. Indirect
d. Indirect
e. Indirect
f. Indirect- delivery only you cannot attribute to a certain product

fix cost-real property tax, insurance

Variable cost-effect the level of activity
90 units