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2. Expenses Center –
b) Discretionary Expenses Center -e.g. R&D,
Advt. Dept
i) Administrative and Support Centers- senior
management units at corporate level
• Inherent control problem is the output can not be
measured
1
Responsibility Centers-
Discretionary Exp. Center
2. Expenses Center –
b) Discretionary Expenses Center -e.g. R&D,
Advt. Dept
ii) Research and Development Centers - basic
question is what should be the optimum size of
R&D budget?
• very difficult to relate inputs with output
• the input and output may span over different and
uneven time periods.
ii) Marketing Centers -
• these RC’s are responsible to bring the order to
the company and to execute the orders. They are
not concerned with what profits their efforts give
but more interested in what revenues they bring.
Therefore their input is expenses incurred for
2
getting the sales and output is what sales they
Committed cost & Budget –
3
Engineered cost & Budget –
4
Discretionary cost and Budget –