Final answer:
The statement is false because managers of cost centers are evaluated on their ability to control costs, not on profit generation. Instead, profit centers are evaluated on profitability, and investment centers are evaluated on profitability and the efficient use of assets.
Step-by-step explanation:
The statement that managers of cost centers are evaluated according to the profits that their departments are able to generate is FALSE. In a business, there are different types of centers: cost centers, profit centers, and investment centers. A cost center is part of an organization that does not directly add to profit but still costs the organization money to operate. Managers of cost centers are typically evaluated based on their ability to control costs, not on their ability to generate profits. On the other hand, managers of profit centers are evaluated on both revenues and costs, and their performance is measured by the profits they generate.
In contrast, an investment center manager is responsible for revenues, costs, and the efficient use of the assets assigned to their department. Their performance is measured not only by the profit they generate but also by how well they manage the investment made into their department.