Profit center
The profit center is an organizational part of a company for which a separate profit for the period is determined. The profit center can also arise from a division organization. Responsibility and decision-making authority for the product groups are largely transferred to the division heads. The divisions become relatively independent units. The division heads plan their business themselves within a given scope of action. A separate profit is determined for each division and used to assess and control the division.
This performance-oriented assessment enables the activity of the relevant area to be better controlled and checked for profitability. While only costs are posted to cost centers , these are compared to the income of the business area or department in a profit center. The core idea is that the profit center should think and act like its own company.
In addition to the profit and loss account , profit center accounting (abbreviated to: PCR , PRCTR ) is sometimes also used to account for individual profit centers.
In addition to the purpose of motivating the employees, who are now responsible for their profits and can act entrepreneurially, the profit center calculation can be used to distinguish profitable company areas from those that make losses. Breaking down earnings contributions to individual employees in order to find out the 'profit contribution' of each employee is only possible if the results of an individual employee can be recorded individually (income and cost side) and is only possible in Germany in compliance with the Works Constitution Act and the Federal Data Protection Act to realize.