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Finding the most and least profitable organizational units depends on understanding profit centers. They work by distinguishing between several revenue-generating pursuits.
This makes it easier to cross-compare and conduct more precise analyses across divisions. A branch or division of a business that directly contributes to or is anticipated to contribute to the overall bottom line is referred to as a profit center. It is handled as a distinct, stand-alone company that generates its own revenues and profits. Its revenues and expenses are computed independently from those of the rest of the company. The phrase "profit center" was first used in 1945 by Peter Drucker.
A branch or division of a business that directly contributes to the bottom line profitability of the company is known as a profit center.
When accounting for its revenues, a profit center is handled as a distinct business.
A cost center, business division, or department that doesn't bring in money is the antithesis of a profit center.
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