Question

Question 3 (2 points) When a company considers dropping the losing profit center, what are the issues that should be considered?

Answer 1

Answer:- Profit center is a branch or division of business organization that responsible for generating revenue and expenses to earn profit. There could be many reason to dropping the profit center due to getting loss.some are following:-

a):- Loss of market:- Loss of market is one most important reason of getting loss. Business organization can't control on market situation. It's totally depends on market factors like recession, Covid -19, Change in choice and of customer choice, availability of subsitutes product etc. Because of these reason Profit center have to afford loss and resulted to dropping.

b):- Loss consumers trust regrading product and services:- When profit center loss the customer's trust regrading product and service, Center losses sale of product and services slowly - slowly. The reason could be focus on short -term goals, Corruption, production of bad quality product, etc. As result, Company have to drop the Profit center.

c):- Loss of key resources:- Lossing key resources of business causing drop the profit center. Key resources of profit center could be Human resource, Physical resources ,Intellectual resources, financial resources . without these Business can't run properly.