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This question is about employer.
Cost center vs. profit center
The difference between a cost center and a profit center is that a cost center is a department within an organization that incurs expenses or costs, but is not directly involved in the generation of revenue, while a profit center is a department within an organization that generates income and directly contributes to the overall profitability of the company.
Cost centers generate expenses for a company, but these costs are associated with functions that help the company perform its operations. Cost centers often try to devise ways to decrease the expenses they produce. Cost centers can take forms, such as production cost centers, service cost centers, and administration and sales cost centers.
A profit center is a department or unit within a company that generates income and profits directly for the organization. Profit centers can take the form of many different types of units in a company. For example, a common profit center in an organization is its sales department. Profit centers can also be classified as separate, standalone revenue generators.
Key Takeaways:
| Cost center | Profit center |
|---|---|
| A cost center is a department within an organization that incurs expenses or costs, but is not directly involved in the generation of revenue. | A profit center is a department within an organization that generates income and directly contributes to the overall profitability of the company. |
| Cost centers often try to devise ways to decrease the amount of expenses they produce. | Profit centers also try to decrease the costs they incur, but they also have the goal of maximizing profits. |
| Cost centers often seek to improve certain areas within a company, like customer service, operations, brand awareness, legal compliance, product value, and others. | Profit centers are geared towards generating revenue from the sales of products and/or services. |
| Cost centers often seek to improve certain areas within a company, like customer service, operations, brand awareness, legal compliance, product value, and others. | Profit centers are geared towards generating revenue from the sales of products and/or services. |
| Some common examples of cost center departments include human resources, marketing, IT, accounting, quality control, and legal. | The most common example of a profit center department is a sales department. |
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