Dr. Dan Jagesia is a world-renowned surgeon who works for a university hospital. Dan receives a handsome salary from the university. In addition, he writes grant proposals and receives funds from federal and private agencies to support his research. Dan received grants totaling $2.5 million last year alone, and his total funding averages $4 million per year. In line with standard practice, the university adds, and the funding agencies pay, a 57% surcharge as overhead recovery. (This recovery is to cover administrative support, lab space, library, etc.) Dan also generates considerable revenue to the university via his clinical service (i.e., operating on patients). Dan often complains that he works for “free” as the patient revenue more than covers his salary.

Required:
How should the university evaluate Dan’s performance? Is he (and his lab) a profit center or a cost center?