What are the advantages and disadvantages of Cost center profit center and Investment Center?

Answer 1

An investment center will help consumers and businesses understand the benefits of investing because they have the time to share and educate customers. A disadvantage is the fact that focusing on one area of business can restrict your business's growth.

Answer 2

Cost center - it is the unit within the organization which is responsible only for costs. Eg- maintainence department in a manufacturing company/production department.

Merits-

1) It enhances performance measurement.

2) It enables training of managers in decision making and running the divisions or their center on strict vigilance.

3) It enhances optimization of investments involved to centers identified.

4) The quality of accountability and decision may be improved.

5) Improved monitoring of investment returns

6) Improved management information on profitability.

7) Improved monitoring of costs and expenditure.

Demerits-

1)incorrect allocation of overheads can lead to under or over estimation of profitability.

2)increases administration and paperwork.

Answer 3

Improved quality of decision