Asked by Mannraj Singh on Sep 24, 2024
Verified
A profit center is
A) evaluated based on minimizing costs within the division
B) evaluated based on maximizing costs within the division
C) evaluated based on minimizing profits generated by the division
D) evaluated based on maximizing profits generated by the division
Profit Center
A department or segment of a business responsible for generating its own revenue and profit.
Minimizing Costs
The process of reducing expenses to the lowest possible level while maintaining efficiency and effectiveness.
Maximizing Profits
The process or strategy of adjusting operations, costs, and pricing to achieve the highest possible return or net income.
- Gain insight into the effects of different compensation and evaluation schemes on the decision processes of division managers and the effectiveness of their divisions.
Verified Answer
CR
Cassandra Rousseau4 days ago
Final Answer :
D
Explanation :
A profit center is a business unit within a larger organization that is evaluated based on the profits it generates. Therefore, the best choice is D, which states that a profit center is evaluated based on maximizing profits generated by the division. Option A, which suggests that a profit center is evaluated based on minimizing costs within the division, is incorrect, as profit centers are not evaluated solely on the basis of minimizing costs, but rather on the profits they generate. Option B, which states that a profit center is evaluated based on maximizing costs within the division, is clearly incorrect, as this would not result in profits. Option C, which suggests that a profit center is evaluated based on minimizing profits generated by the division, is also incorrect, as this would not be a viable business strategy.
Learning Objectives
- Gain insight into the effects of different compensation and evaluation schemes on the decision processes of division managers and the effectiveness of their divisions.