The Difference Between a Profit Center and an Investment Center

question 78

Multiple Choice

The difference between a profit center and an investment center is

• A) an investment center incurs costs, but does not directly generate revenues.
• B) an investment center incurs no costs but does generate revenues.
• C) an investment center is responsible for effectively using center assets.
• D) an investment center provides services to profit centers.
• E) There is no difference; investment center and profit center are synonymous.

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Definitions:

Milling Department

A specific section within a manufacturing facility where materials are ground, cut, or otherwise processed through milling operations.

First-In, First-Out Method

This is an inventory valuation method where goods first added to inventory are the first ones to be sold.

Equivalent Units

A concept used in cost accounting to assign costs to partially completed goods, expressed in terms of fully completed units.

Conversion Costs

The sum of direct labor and manufacturing overhead expenses involved in turning raw materials into completed goods.