Chapter 14, Problem 1SEQ

When the manager has the responsibility and authority to make decisions that affect Costs and revenues but no responsibility for or authority over assets invested in the department, the department is called:
A. A cost center
B. A profit center
C. An investment center
D. A service department

To determine

Concept Introduction:

Cost center:

Cost center incurs costs and does not generate the revenue directlyInvestment Center:

Investment center takes care of revenue, cost and investment

Profit Center:

Profit center generate revenue and incur expenses

To choose:

The correct option for the center

Answer to Problem 1SEQ

B. A Profit Center

Explanation of Solution

Explanation for correct answer:

Profit center generate revenue and incur expenses and its decisions affect costs and revenues. Hence the correct option is B.

Explanation for incorrect answers:

A. Profit center generate revenue and incur expenses and its decisions affect costs and revenues. Hence this option is incorrect.

C. Profit center generate revenue and incur expenses and its decisions affect costs and revenues. Hence this option is incorrect.

D. Profit center generate revenue and incur expenses and its decisions affect costs and revenues. Hence this option is incorrect.