Abstract
A profit centre is an operating unit in a diversified corporation and is so named because it makes a profit or loss on sales in an external product market (Anthony and Govindarajan 2006). The apposite comparison is with a cost centre, which incurs expenses but no revenues to cover them. A profit centre acts and is treated like a stand-alone business, and its management behaves and is evaluated in this context. Profit centres are considered ‘decentralized’ within the firm, whereas, since their managers have less discretion, cost centres are thought of as ‘centralized’.
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Walker, G. (2016). Profit Centres. In: Augier, M., Teece, D. (eds) The Palgrave Encyclopedia of Strategic Management. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-94848-2_676-1
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DOI: https://doi.org/10.1057/978-1-349-94848-2_676-1
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Publisher Name: Palgrave Macmillan, London
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