A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a (n)
A) profit center
B) investment center
C) volume center
D) cost center

Question

Quizplus · Accepted Answer

A profit center is a responsibility center where the manager is accountable for both the costs and revenues generated by the department. The manager has the authority to make decisions related to the budget, pricing, sales, and expenses to maximize the profitability of the department. In contrast, a cost center manager is responsible only for controlling expenses, whereas an investment center goes beyond just costs and revenues and includes the responsibility for achieving a return on investment. A volume center is not a common term in management accounting.

A Responsibility Center in Which the Department Manager Has Responsibility