Which statement best describes a profit center?

• A. A unit within a company where the manager is responsible for controlling both revenues and costs, and for profits
• B. A unit that only produces goods
• C. A unit that is not accountable for profits
• D. A unit that handles corporate budgeting

Answer: (A)

A profit center is a part of a company where the manager is held responsible for both generating revenues and controlling costs, with performance judged by the unit’s profit. This setup creates accountability for the full profitability of that unit, not just for spending or for sales in isolation. It differs from a cost center, where the focus is on keeping costs down, and from a revenue center, where the emphasis is on generating sales without necessarily being responsible for profits after costs. The description fits a profit center because it explicitly ties revenue, costs, and profit to the manager’s responsibility, rather than limiting accountability to production or budgeting alone.