What is an Expense Center? Meaning.
An Expense Center is a cost center with an output that
cannot be easily measured. Managers of these units typically have fixed budgets
and should maximize service or output within that budget. Because the cost
per output is difficult to measure, the users of an EC are generally not charged
directly for its services. Rather these entities are paid via the overhead
costs. As a result, the users of an EC tend to over consume its services.
This then leads the manager of the EC to request additional budget.
Typical examples of these organizational entities are Human
Resources, Accounting, Public Relations, Research and Development.
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Compare with:
Strategic Business Unit
| Profit Center |
Cost Center |
Revenue Center |
Performance Management
| RONA |
Activity Based Costing |
Balanced Scorecard |
CSFs and KPIs |
Value Based Management
| Transfer Pricing
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