What characterizes a cost center?

A cost center is characterized by its primary focus on controlling and managing costs rather than generating revenue. This type of department is typically responsible for ensuring that expenses are kept within budget while still maintaining operational efficiency.

In a cost center, the performance is evaluated based on its ability to minimize costs and improve effectiveness in its processes. Unlike profit centers or revenue-generating units, cost centers do not directly contribute to the company's revenue; instead, their goal is to support the organization by managing the costs associated with their operations. This distinction underscores the importance of cost accountability in various departments, such as HR, IT, or maintenance, where their contributions, while essential, do not come from direct revenue generation.

Thus, the correct answer effectively captures the essence of a cost center and its function within an organization.