Question

I am getting confused with Revenue center and profit center. Please explain their difference (include other three centers, sometimes I get confused as well ) And give examples for them.

Answer 1

The main difference between the profit center and the revenue center is highlighted.

types	meaning	example
5	A responsibility center is a unit of an Organisation for which a particular executive has direct responsibility for its performance.
cost center	Cost center is a responsibility center for which costs are accumulated.	Human resourse department of an organisation.
	Here managers are responsible for cost incurred only.
	This could be a location, a person, a product.
revenue center	A responsibility center for which only revenues are accumulated. It is devoted to only raising revenue and is not concerned with anything else.	sales center
Profit Centre	Here both cost and revenues are accumulated. The manager must be able to control both costs and revenues. This is a strategic business unit of the organization, whose aim is to maximize profits	Supermarket having a different department like men's clothing, women's clothing, toys,etc
	The main objective is to maximize the center's profit(revenue - expenses)
contribution center	Here the contribution i.e., the difference between sales and variable costs is accumulated.	manufacturing units which manufactures pens and has fixed expenses like electrcity, which are unavoidable and not controlled by the manager.
	Manager has no control over fixed expenses, but can control variables expenses and sales.
	he/she can increase sales or decrease variable expenses
investment center	Here the cost, revenue, and investments in assets are accumulated.	a subsidiary company or a separate division in the organisation
	The aim here is to maximize the centre's return on investment
	The manager has the most responsibility than any other responsibility center.
HOPE THIS WAS HELPFUL. A LOT OF EFFORT HAS BEEN PUT INTO THIS TO MAKE IT EASILY UNDERSTANDABLE. INCASE OF DOUBTS, GET BACK TO ME. DO CONSIDER GIVING THIS A THUMBS UP.