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In cost center is unit of organisation responsible only forr cost incurred..eg-production dept.
a profit center is responsible for both cost & revenue
A cost center is an organizational department or function that does not produce direct profit and adds to the cost of running a company but that is nevertheless crucial to the organization because it adds to profitability indirectly or fulfills some other mandate.
A profit center is responsible for generating its own results and earnings, and as such, its managers generally have decision-making authority related to product pricing and operating expenses. Profit centers are crucial in determining which units are the most and least profitable within an organization.
>>When the manager of a responsibility center can control only costs, the responsibility center is referred to as a Cost center.
>>If a manager can control both costs and revenues, the responsibility center is known as a profit center.
A cost center is a subunit of a company that is responsible only for its costs. Example of cost centers are the production departments and the service departments within a factory and administrative departments such as IT and accounting.A profit center is a subunit of a company that is responsible for revenues and costs. Often a division of a company is a profit center because it has control over its revenues, costs, and the resulting profits.Cost centers and profit centers are usually associated with planning and control in a decentralized company.
Agreed with the answer Ayman
Cost center is the unit of a company where the company only incurring cost Like production Unit where as in profit center the company earn revenue like Sales department of the company
Every business must maintain a balance sheet, which is one of the major financial statements that businesses produce and use to track financial performance. A balance sheet lists all assets and liabilities for the business, including those that belong to its profit centers, cost centers and other types of departments or areas of operation.
Profit Center
A profit center is a part of a business that generates revenue while also taking on its own costs, making it possible to calculate the department's profit as a self-contained unit. Profit centers may include a general or specific field in which a business operates or a specific market that it operates in, as long as the costs and revenues for that market can be distinguished from those that apply to other markets.
Cost Center Definition
Unlike a profit center, a cost center is not operated with the intention of earning revenue or making a profit directly. Instead, it is a part of a business that generates costs without making money. A cost center only enables profit centers to generate revenue. For example, in a small retail business, each store, or each class of products, may operate as a profit center, while the customer service and human resources divisions operate as cost centers.
