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:

Inventory

The raw materials, work-in-process products, and finished goods that are considered to be the portion of a business’s assets that are ready or will be ready for sale.

Current Asset

An asset that is expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer.

Classified Balance Sheet

A financial statement that organizes a company's assets, liabilities, and equity into subcategories for clear understanding.

Gross Profit Section

The portion of an income statement that shows revenue minus the cost of goods sold, indicating the profit made from selling goods before other expenses are deducted.