Profit Center

Profit centers are typically units that sell to customers, such as product divisions, regional businesses, individual stores or branches. Their managers can influence prices, sales volume, product mix and costs.

For example, a retail chain treats each store as a profit center. Store managers are evaluated on their store's profit, taking account of sales, staff costs, stock losses and local expenses.

Profit centers encourage managers to think like business owners, balancing growth and cost control. They make it easier to see which parts of a business are performing well.

Measuring profit fairly can be difficult, especially when units share costs or trade with each other. Allocations of head office costs and internal transfer prices can affect reported profits in ways managers cannot control. Profit centers are one part of responsibility accounting, alongside cost centers, which control costs only, revenue centers, which are judged on sales, and investment centers, which are judged on returns on the capital they use.