The correct answer is D.
A profit center is a business unit that is responsible for both revenues and expenses. The management of a profit center is held accountable for the unit’s profitability and has the authority to make decisions regarding its products, markets, and source of supply.
Option A is incorrect because a profit center can be involved in revenue generating activities. For example, a sales department is a profit center because it is responsible for generating sales revenue.
Option B is incorrect because a profit center’s management is not always evaluated on asset investment. For example, a small business may not have any assets to invest.
Option C is incorrect because a profit center’s management is not always compensated based on the level of profitability. For example, a non-profit organization may not have any profits to distribute to its management.