What is a cost center in business?
A cost center is any part of a business that does not directly produce revenue, such as by making sales. When a company looks at its budget, that department or division shows up only as a cost of doing business.TermsA cost center is the opposite of a “revenue center,” a department that directly produces revenue. A related concept is the “profit center,” a department that incurs significant costs, but from which revenue more than makes up for it.ExampleA company’s customer service department is usually considered a cost center. While the people in that department are responsible for keeping customers happy, they aren’t bringing in money with each interaction.OutsourcingCost centers are often targeted for outsourcing—that is, hiring a separate company to come in and perform those functions at a lower cost. Call centers, janitorial services, building maintenance and cafeteria services are all frequently outsourced.Indirect RevenueCost centers often produce indirect revenue for a company
