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The accounting department of a manufacturing company is a(n):Multiple choice question.investment centerasset centerprofit centercost center

Question

The accounting department of a manufacturing company is a(n):

  • investment center
  • asset center
  • profit center
  • cost center
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Solution

The accounting department of a manufacturing company is a(n): cost center.

Here's why:

  1. An investment center is a business unit that can utilize capital to contribute to a company's profitability. Accounting departments do not typically fall into this category.

  2. An asset center refers to a business segment responsible for the company's assets. While the accounting department does track and report on assets, it does not manage them directly.

  3. A profit center is a part of a company that directly adds to its profits. The accounting department, while crucial to operations, does not generate profits.

  4. A cost center is a department that does not produce direct profit but still costs the company money to operate. The accounting department falls into this category as it incurs costs (like salaries of employees, software, etc.) but does not generate revenue.

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