The manager of the Q division of Halter and Trueblood plc has the authority to set selling prices for his division, and to control costs.Decisions on capital investment are made at head office. Q division can be best described as a:
A)Contribution centre
B)Profit centre
C)Investment centre
D)Cost centre

Question

Quizplus · Accepted Answer

A profit centre is a business unit that has both revenue and cost responsibilities, and the manager has the authority to make decisions regarding sales prices and cost control, as seen in the case of the Q division. In a profit centre, performance is measured by the profit generated by the unit, whereas in a cost centre, performance is measured by the ability to control and reduce costs. Investment centres have additional responsibility for capital investment decisions, which are made at head office in this case. Contribution centres differ from profit centres in that they only have revenue responsibility and their contribution to overall profits is measured.

The Manager of the Q Division of Halter and Trueblood