Revenue center

Definition

A revenue center is a segment within an organization primarily responsible for generating sales or revenue. Unlike cost or profit centers, it focuses on maximizing income through sales performance.

5 Must Know Facts For Your Next Test

1. Revenue centers are evaluated based on their ability to generate income.
2. They do not directly control costs or profits but focus solely on sales.
3. Examples of revenue centers include the sales department or a retail store within a chain.
4. Performance measurement for revenue centers often involves metrics like sales volume and revenue growth.
5. Effective management of a revenue center is crucial for overall organizational profitability.

Review Questions

• What is the primary responsibility of a revenue center?
• How are revenue centers typically evaluated?
• Can you give an example of a department that would be considered a revenue center?

Related terms

Cost Center: A segment in an organization responsible for controlling costs without directly generating revenue.

Profit Center: A division that is responsible for both generating revenues and controlling costs, thereby affecting the overall profitability.

Responsibility Accounting: An accounting system that collects, summarizes, and reports financial information related to the responsibilities of individual managers.