Question

Which report is more effective in evaluating the performance of profit centers?

Answer 1

Profit centers use departmental income statements reports for effectively evaluating the performance of profit centers.

Explanation:

The success of manager in generating the income or profits are evaluated by a profit center.It uses the income statements reports for the purpose of evaluating the performance of profit center in an effective way. The segment that intakes cost and generates profits is an investment center. They are mainly responsible in the effective utilization of an organisation's asset.

An enterprise determines the performance of a profit center financially in absolute terms. It is the profit potential of the unit that determines the performance Managers. A manager of a highly profitable segment gain more success than the lower one.