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A business unit is known as a profit center:
Select one:
a. if its management is held accountable for both revenues and expenses, and has the authority to make decisions regarding its products, markets, and sources of supply.
b. if its management is compensated based on the level of profitability.
c. if its management is evaluated not only on revenues and expenses but also on asset investment.
d. if its operations or departments are not directly involved in revenue generating activities, but instead focus on elements of cost control (including choosing the source of supply).
Expert Answer
a. if its management is held accountable for both revenues and expenses, and has the authority to make decisions regarding its products, markets, and sources of supply.-Investment center
b. if its management is compensated based on the level of profitability.-Profit center
c. if its management is evaluated not only on revenues and expenses but also on asset investment.-Investment center
d. if its operations or departments are not directly involved in revenue generating activities, but instead focus on elements of cost control (including choosing the source of supply).-Investment center
So the option is B. if its management is compensated based on the level of profitability.
