Profit Center
A business unit or department responsible for both generating revenue and controlling its own costs.
What is Profit Center?
A profit center is a segment, division, or business unit of an organization that is held accountable for both revenues and costs, with its performance measured by the profit (or loss) it generates. Managers of profit centers have authority over pricing, product mix, and cost control — allowing a more complete assessment of their decision-making than a cost center, where only costs are tracked. Profit center reporting supports decentralized management, enabling large organizations to evaluate each unit as if it were a standalone business. Transfer prices between profit centers must be carefully set to avoid distorting individual unit performance and overall company profitability.
Example
General Electric historically structured its industrial divisions — aviation, power, healthcare — as separate profit centers. Each division had its own P&L, with managers compensated on divisional profit targets. This structure allowed GE's corporate leadership to compare performance across units, allocate capital to higher-return divisions, and hold local management accountable for both revenue generation and cost discipline.