Johnson Products Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance, using income from operations as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31, 2012:

The company operates three service departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer Support Department is the company€™s point of contact for new service, complaints, and requests for repair. The department believes that the number of customer contacts is an activity base for this work. The Legal Department provides legal services for division management. The department believes that the number of hours billed is an activity base for this work. The following additional information has been gathered:

1. Prepare quarterly income statements showing income from operations for the three divisions. Use three column headings: East, West, and Central.
2. Identify the most successful division according to the profit margin.
3. Provide a recommendation to the CEO for a better method for evaluating the performance of the divisions. In your recommendation, identify the major weakness of the present method.

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$ 720,000 Revenues-East Revenues-West 860,000 Revenues-Central 1,560,000 Operating Expenses-East Operating Expenses-West Operating Expenses-Central Corporate Expenses-Shareholder Relations Corporate Expenses-Customer Support Corporate Expenses-Legal General Corporate Officers' Salaries 456,150 511,700 943,550 112,000 385,000 152,000 240,000 West Central East Number of customer contacts Number of hours billed 4,375 950 5,250 1,520 7,875 1,330