Responsibility Centers. Petroleum Products, Inc., operates primarily in the Unit

Question

Responsibility Centers. Petroleum Products, Inc., operates primarily in the United States and has several segments:

Accounting and finance: responsible for recording financial information and preparing financial reports.

Human resources: responsible for hiring employees and maintaining personnel records.

Retail stores: responsible for sales prices and all costs within each store.

Advertising: responsible for promotional materials.

Production: responsible for manufacturing company products.

International operations: acts as an independent segment responsible for all facets of the business outside of the United States.

Required:

For each of the preceding segments, identify whether it is a cost center, profit center, or investment center. Explain your answer.

Explanation / Answer

Answer – Petroleum Products Inc is an organization operates in US and other several segments

RC – stands for Responsibility Centers

RC - Accounting and finance: responsible for recording financial information and preparing financial reports.

Cost Center – Accounting and finance is a cost center, as the functional resource cost is a cost to company and they do not make or sell or market company product.

RC - Human resources: responsible for hiring employees and maintaining personnel records.

Cost Center – Human Resources is a cost center ,as again Human Resource do not make or sell or market product of the company.

RC - Retail stores: responsible for sales prices and all costs within each store.

Profit Center – Retail store is a profit center, as the this center sell the company products to the consumers and collects the cash from customer and earn profit for the company.

RC - Advertising: responsible for promotional materials.

Investment Center – Advertising is a investment center as it promotes the company products, which helps to increase awareness in the market and results in gain of consumers from the market and which will increases the sales of the company.

RC - Production: responsible for manufacturing company products.

Profit Center - The production is a profit center as it makes the company products and which upon selling in market results in profit gain.

RC - International operations: acts as an independent segment responsible for all facets of the business outside of the United States.

Profit Center – The international operations is a profit center as it runs operations to sell the company products in the international market which results in profit gain for the company.

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