Which of the following statements regarding profit centers is correct?
A) A manager of a profit center has more responsibility than a manager of an investment center.
B) A manager of a profit center is evaluated only on his/her ability to control costs.
C) A manager of a profit center is evaluated on his/her ability to control costs and generate revenues.
D) A manager of a profit center is responsible for assets, liabilities, and earnings.

Question

Quizplus · Accepted Answer

A profit center is responsible for generating revenues as well as controlling costs. Therefore, a manager of a profit center is evaluated on his/her ability to control costs and generate revenues. Option A is incorrect because managers of investment centers have more responsibility than managers of profit centers as they are responsible for managing both revenue and cost control as well as capital investments. Option B is incorrect because a manager of a profit center is evaluated on both cost control and revenue generation. Option D is also incorrect because a manager of a profit center is responsible for managing earnings but not necessarily assets and liabilities of the organization.

Which of the Following Statements Regarding Profit Centers Is Correct