Definition of Cost Center
A cost center is a subunit of a company that is responsible only for its costs. A few examples of cost centers are:
- Production departments within a factory
- Service departments within a factory
- Administrative departments such as IT and accounting
Definition of a Profit Center
A profit center is a subunit of a company that is responsible for revenues and costs. If a division of a company has responsibility for revenues, costs, and the resulting profits, it is a profit center.
Cost centers and profit centers are usually associated with planning and control in a decentralized company.