What is a profit centre?

Question

Quizplus · Accepted Answer

A profit centre is a responsibility centre that incurs costs and generates revenues. Its performance is evaluated based on the profit earned by the centre. Profit centres are often used by companies to evaluate the performance and profitability of different divisions or departments. Option A is incorrect because it is possible for a profit centre to have incurred losses in the past. Option C is incorrect because while the rate of return may be one way to evaluate a profit centre, it is not the only way. Option D is incorrect because a profit centre may have higher or lower costs compared to other divisions, it is the profit generated that is important.

What Is a Profit Centre