A Profit Center Is

question 25

Multiple Choice

A profit center is

• A) a responsibility center that always reports a profit.
• B) a responsibility center that incurs costs and generates revenues.
• C) evaluated by the rate of return earned on the investment allocated to the center.
• D) referred to as a loss center when operations do not meet the company's objectives.

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Definitions:

Inputs

Resources such as labor, materials, and capital that are used in the production process to create goods or services.

Average Total Cost

The total cost divided by the quantity produced, calculating the per-unit cost of production.

Variable Cost

Charges that adjust in alignment with the volume of production or output levels.

Total Cost

The sum of fixed and variable costs incurred in the production of goods or services.