Profit centre
Profit centre is a responsibility centre whose manager is accountable for both revenue and costs, so profit is the natural performance measure. A cost centre controls spending only; an investment centre also manages capital employed.
Also known asprofit center
FrameworkResponsibility accounting
See it move
A formula card states Segment profit = Revenue − Controllable costs, defining Revenue as the income the unit generates and Controllable costs as the costs the manager can actually influence. Three supporting points clarify the scope: the profit-centre manager is accountable for both sides of the profit-and-loss account, unlike a cost centre (costs only) or a revenue centre (revenue only); allocated head-office charges are excluded from the performance report because the hotel manager cannot influence them; and the profit centre sits between a cost or revenue centre and an investment centre in the responsibility hierarchy.
Check yourself
A hotel chain divides its business into individual properties. Each property manager sets room rates and controls staffing levels but cannot approve capital expenditure or acquire new assets. How should each property be classified as a responsibility centre?