profit centres
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lgarside
Registered Posts: 122 Dedicated contributor 🦉
Hello can someone give me some examples of cost and "profit" centres. I don't really understand the difference between these and how they interact. For example in a factory the production line making christmas trees (thought I would be seasonal) is this cost centre also a profit centre? If not which part would be the profit centre?
Thanks
Thanks
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The production line would be a profit centre as they are making the product to make profit.
A cost centre would be marketing, for example.0 -
Thanks purple girl, so would you have to allocate costs to both the profit centre and cost centre? In the previous example would sales be a profit centre as once the trees are sold they will produce a profit, or would this be a cost centre as it's not directly related to making the product?
Many thanks for your help.0 -
your total sales would be allocated to the various profit centres you have created. You might have 3 departments in a shop, frozen food, fresh food and hardware. Each could be a profit centre. You would allocate direct costs and sales to each and then apportion any associated costs from cost centres i.e. admin, finance, rent etc0
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