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Profit centre

A profit centre is a responsibility unit whose manager is accountable for both revenue and relevant costs, and therefore a measure of profit. Define which costs are controllable and distinguish managerial performance from the overall economic performance of the unit. Shared head-office allocations can help show total organisational cost but may not measure the manager’s decisions. Non-financial indicators are still needed to avoid short-term profit manipulation.

Worked example

A branch earns $500,000 revenue and incurs $350,000 controllable costs, giving $150,000 controllable profit. A separate $30,000 head-office allocation should be identified clearly.

Common mistake

Do not assume the highest short-term profit proves the best performance if service quality, maintenance or future capacity has been sacrificed.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA MA Direct September 2026–June 2027
ACCA PM Direct September 2026–June 2027
FIA FMA Direct September 2026–June 2027