Question

Which statement below best describes a profit center?
(a) the authority to make decisions affecting the major determinants of profit, including the power to choose its markets, sources of supply, and significant control over the amount of invested capital
(b) the authority to provide specialized support to other units within the organization
(c) the authority to make decisions over the most significant costs of operations, including the power to choose the sources of supply
(d) the authority to make decisions affecting the major determinants of profit, including the power to choose its markets and sources of supply
(e) the responsibility for combining the raw materials, direct labor, and other factors of production into a final product

Answer 1

Answer: (B) The authority to make decisions affecting the major determinants of profit, including the power to choose its markets and sources of supply and significant control over the amount of invested capital.

Explanation:

 The profit center is the type of center in which the authority makes various types of decisions that affect the major profits. It also include the power for choosing the market and the sources.

The profit center is the type of business unit which basically generate the various type of revenue and cost. It is the type of department that generate the income by using the organization resources. The profit center has the significant control on the amount of the invested capital.

Therefore, Option (B) is correct.