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Essay about Profit Center

Decent Essays
The TallTree2 Hotel Casino is a 640-room resort complex featuring a full range of Nevada-style gaming with slot machines and table games. Besides the hotel and casino, it also operates four restaurants, two entertainment showrooms and three gift shops. Because of the economic environment at the time, TallTree2 wanted to improve its bottom line by launching a range of Special Events like golf tournaments, boxing matches, New Year Parties and a series of pit, keno and slot tournaments. Those special events were specifically designed to compensate for the slow periods and generate additional gaming revenues.
Terrence Wei, the new property president, feels that his department managers appear to be in conflict with each other. The managers
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The company is decentralized and each department is a responsibility center. A responsibility center is a division of a company for which a manager has the authority to make decisions. The main types of responsibility centers are cost centers and profit centers.
A cost center is a division of a company that is responsible for the keeping the costs as low as possible. Cost centers contribute to a company’s profitability indirectly like marketing, customer service or research and development.
A profit center is a division of the company that is accounted for on a standalone basis for the purpose of profit calculation. The managers of those profit centers have the decision-making authority related to product or service pricing and operating expenses. Therefore, the profit center is responsible for making its own earnings.
The goal is to reorganize the allocation of costs so that each segment is profitable. The special events target high rollers and should bring more money that they currently bring.
The Casino department should still be run as a profit center. Gambling is the largest source of revenue for the hotel casino complex. The department manager controls the revenues by offering special promotions and complimentary food, beverages and rooms in times of slow periods. The manager is not only responsible for the profit generated but also for the costs.
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