COST CENTRES AND PROFIT CENTRES

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:24AM in AAT student discussion
Hi i'm new on the discussion forum but here goes....

just started unit 4 in foundation level and getting frustrated by cost and profit centres...

help with the following question would be appreciated and might get my through this unit!!!!

What possible cost and profit centres might the following organisation have?

An adult education college that teaches science, humanties, and recreational subjects. The courses are booked and organised by the admin section and the college also has a canteen for students and a book shop.

Many thank in advance

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:COST CENTRES AND PROFIT CENTRES

    Hi

    I did this last year, and I would probably use the following examples:

    Cost Centres (A department/place where a cost can be allocated to): Science dept, Humanities dept, recreational subjects department, admin dept

    Profit Centres (Like a cost centre except that they can also make a profit by selling things)Therefore: the canteen and the book shop

    Hope this helps clarify things a bit :D
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:COST CENTRES AND PROFIT CENTRES

    yeah i thought this but then i wondered if the different subject depts could be profit centres as wouldnt you have to pay fees for the courses and therefore they would also gain income also!???

    AGH....this is driving me mad sometimes i think I think too deep into the question!!!

    Thanks for your help though!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:COST CENTRES AND PROFIT CENTRES

    It wouldn't be the individual subject that gains the course fees, instead that would be attributed to the college as a whole. The fees, when paid, will probably be coded dependant on which course is sold to the customer which will allow you to view which courses are profitable and which are not.

    J
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:COST CENTRES AND PROFIT CENTRES

    thanks j

    just to recap then.....you think that the individual subjects are therefore only cost centres and not profit centres then.......right

    apologises if i appear thick but i am finding this hard unit to grasp
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:COST CENTRES AND PROFIT CENTRES

    It's a difficult one to decipher - you probably could count them as profit centres as they are the product the customer is buying, but they are not buying the course from the course, they are buying the course from the college and this makes me think they are not profit centres.

    If someone can come along and give me a valid reason to change thr way I am thinking about this then please do - I don't want to get things wrong and pass on duff info

    J
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:COST CENTRES AND PROFIT CENTRES

    The individual departments would make a contribution to the overall running of the college, for utility bills, cleaning etc.

    I agree that they are cost centres.

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:COST CENTRES AND PROFIT CENTRES

    Scott i agree that they are cost centres and i understand why they are......ie they incur expenses seperately......but do they also gain income thus making them a profit centre rather than a cost centre?

    I apologise if i dont make any sense but bear with me.....
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:COST CENTRES AND PROFIT CENTRES

    Yes, they draw in income, but that income will pay off staffing costs, utility bills, rents, etc. Any surplus will go to the college as a whole and is a 'contribution' rather than a 'profit'.

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:COST CENTRES AND PROFIT CENTRES

    Thanks again scotty....your explanation really helped!

    I can answer the question now........yippee!

    This was my first post but I am sure that I will be using it again in the future.....it is good to know there are people who "understand" all the things about accounting that baffle me!

    Cheers all!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:COST CENTRES AND PROFIT CENTRES

    No problem.

    You'll come across contribution again later!

    Scott :-)

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