Profit Center

What is Profit Center ?

Profit Center is a unit of a company that generates revenue and incurs costs, and is responsible for its own profit and loss. It is a concept used in managerial accounting to evaluate and measure the performance of different business units within an organization. Profit centers are often established based on product lines, departments, geographical locations or any other logical grouping.

What is the main purpose of creating a profit center ?

The main purpose of creating profit centers is to provide a clear picture of the profitability of each business unit, which helps managers in making informed decisions regarding resource allocation, pricing, product mix, and investment. Profit center accounting also helps to identify areas of improvement and to hold the responsible individuals accountable for the financial performance of their units.

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