What does P&L mean (as in a P&L center) when talking about marketing a service?
I'm doing a book case study over service marketing. In the case, it says that a company is considering moving from a cost center to a P&L center. Is that supposed to be short for profit/loss?
P&L is always Profit and Loss. A cost center isn't required to make a profit, it just adds to the cost of running the business. The management is graded on factors such as productivity or how well they meet production and quality goals rather than on P&L. Changing to a profit center (the preferred term) works only if the management has control over both output and input. Example: in making widgets, the manufacturing group has no control over sales. They may be able to control how much they pay for materials, labor costs, inventory, inventory holding costs, but they can't actually sell them. This makes them better as a Cost Center. On the other hand, an individual store is a profit center. They control sales and enough of the costs to impact P&L.
P&L is always Profit and Loss. A cost center isn't required to make a profit, it just adds to the cost of running the business. The management is graded on factors such as productivity or how well they meet production and quality goals rather than on P&L. Changing to a profit center (the preferred term) works only if the management has control over both output and input. Example: in making widgets, the manufacturing group has no control over sales. They may be able to control how much they pay for materials, labor costs, inventory, inventory holding costs, but they can't actually sell them. This makes them better as a Cost Center. On the other hand, an individual store is a profit center. They control sales and enough of the costs to impact P&L.
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