What is Cost Center?

Cost Center

Cost center is a part of an organization that helps with business operations by providing guidance and support. A cost center doesn’t add directly to profits and adds to the cost of company operations. It can also be seen as a type of department.

Cost centers are said to be indirectly linked to generating profits and are always in pressure to keep their cost within budget. When considering layoffs and downsizing these types of departments are the first ones to be targeted.

 

Example

Human Resources department, Finance department, etc.

 

Example showing cost center

Total of HR will be total of all its sub cost centers

 

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