A Cost Center is one of the three responsibility centers defined in Responsibility Accounting.
A cost center incurs costs (and expenses) directly but does not generate revenues.
Example: A production or a service department.
A typical report for a cost center is to compare the actual costs with the budget.
When the report shows the actual and budget, only the controllable costs should be included in the report.
A responsibility center should have a manager assigned. The manager of a cost center is evaluated by whether he or she can met the department’s goal within the budgeted costs.