Asked by Sameeha Riptee on May 23, 2024
Verified
What is the main difference between a cost center and a profit center?
Cost Center
A department or function within an organization where its costs are accumulated, but it does not directly generate revenue.
Profit Center
A business unit or department within an organization that is treated as a separate entity for the purpose of calculating its profitability.
- Distinguish between cost centers and profit centers and their impact on organizational structure and performance evaluation.
Verified Answer
BR
Bailey RobinsonMay 24, 2024
Final Answer :
A cost center incurs costs but does not directly generate revenues.A profit center incurs costs and also directly generates revenues.This difference implies that managers of two types of these centers must be evaluated differently.
Learning Objectives
- Distinguish between cost centers and profit centers and their impact on organizational structure and performance evaluation.
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