Answer to Question #128365 in Management for Precious

Question

describe the main characteristics and objectives of profit centres and investment
centres

Answer 1

profit center is a branch or division of a company that directly adds to the corporation's bottom-line profitability. A profit center is treated as a separate business, with revenues accounted for on a standalone basis and balance sheet.

Objectives

1.To determine which units are the most and the least profitable within an organization

2. To facilitate a more accurate analysis and cross-comparison between divisions.

Characteristics

1. Are treated as virtually stand alone business

2. They are a branch or division of a larger company e.g wallmart

3. The managers or executives in charge of profit centers have decision-making authority related to product pricing and operating expenses