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The correct option is a. cost centre
A manufacturer's raw-material purchasing department would likely be classified as a cost centre.
What is cost centre?
A cost center is a division or function within about an organization that doesn't immediately contribute to profit but nonetheless costs money to run.
Cost centers only indirectly contribute to the a company's profitability, but profit centers actively contribute to profitability through their actions.
Some key features regarding cost centre are-
- A cost center is a function inside a business that does not directly contribute to profit but nevertheless costs to operate, like the accounting, human resources, or information technology departments.
- A cost center's primary function is to monitor actual spending for comparison with budget.
- A cost center contributes to a company's profit indirectly through continuous improvement, customer service, and increased product value.
- The manager of a cost center is simply responsible for maintaining costs under budget and has no authority over revenue and investment decisions.
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