Cost Center Cost Analysis

Introduction- In the current era of economic slowdown, investment in human resource is a profit center and not cost centers. It is the profit center as its performance is judged through the profit generated by it. Human resource people work with the employees to train them for better productivity and have less cost expenses and similarly HR manage everything to cut costs and maximize profit.

Cost Centre is the unit that produces only cost whereas profit center is the unit that generates revenue, profit & cost for the firm, for example production department is cost center & the human resource department is the profit center as HR controls revenue.

So Human Resource is important for a firm as it helps in generating profit, which is essential

Kill overhead- Extra expenses can be cut down by following a process, implementing an efficient way of operation, the best deal done with the supplier so as to avoid wastage of time and money, this helps to lessen overhead.

2. Invent revenue- the human resource works to find the source of revenue, this makes the Human Resource team a profit center instead of being a cost center, like if the firm has extra building space, inventory or capacity to work then that could be sold or given on lease. This amount generated will help in meeting the expenses of the company, thus HR becomes a profit center even in case it produces no loss and profit for the firm. So an HR that manages the cost manages is not a cost center.

3. Support strategy- support done by the human resource team can help to improve the performance of the firm, like improving the quality, service or better means of approaching customer through informative and attractive advertisement so as to get more customer satisfaction leading to generation of demand and increase in sales revenue. Thus, human resource helps the firm to generate profit by increasing the sale of its product and