Multiple Choice
Which of the following is a characteristic of process costing?
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4. Merchandising Operations
Service Company vs. Merchandising Company
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A segment of a business responsible for both revenues and expenses would be called:
A
A cost center
B
A revenue center
C
An investment center
D
A profit center
Verified step by step guidance1
Understand the concept of a profit center: A profit center is a segment of a business that is responsible for generating both revenues and incurring expenses. Its performance is typically evaluated based on the profit it generates.
Compare the definitions of other types of centers: A cost center is responsible only for costs, a revenue center is responsible only for revenues, and an investment center is responsible for revenues, expenses, and investments.
Identify the key characteristic of the segment described in the problem: It is responsible for both revenues and expenses, which aligns with the definition of a profit center.
Eliminate incorrect options: Since the segment is responsible for both revenues and expenses, it cannot be a cost center (only costs) or a revenue center (only revenues). An investment center involves additional responsibilities like investments, which are not mentioned in the problem.
Conclude that the correct answer is a profit center, as it matches the description provided in the problem.
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