What is a profit centre?

A profit centre is defined as a unit within a business that generates revenues. This concept is critical in managerial accounting and performance evaluation, as it highlights the financial contribution of that specific unit to the overall organization's profitability. By focusing on generating revenues, a profit centre can engage in activities that enhance its sales and customer base, often including strategies for marketing, product development, and customer service.

Profit centres are typically evaluated based on their ability to produce profit, which is the difference between the revenues they bring in and the costs incurred. This measurement allows organizations to assess which parts of the business are performing well financially and which may need improvement.

In contrast, the other options reflect different types of organisational units. A section focused only on cost management would not be generating revenue, but rather be concerned with managing expenses, thus not fitting the definition of a profit centre. A department that incurs only expenses does not create positive financial outcomes, while a business unit with no financial accountability would lack the metrics needed to evaluate its performance in terms of profits. Recognizing these distinctions helps clarify why option B accurately describes a profit centre.