2 Profit Center Responsibility Reporting for a Service Company Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance, using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31 Revenues-N Region $1,125,600 Revenues S Region 1,317,500 Revenues-W Region 2,351,900 Operating Expenses Region 713,300 Operating Expenses S Region 784,100 Operating Expenses-W Region 1.422,300 Corporate Expenses-Dispatching 598,000 Corporate Expenses --Equipment Management 225,000 Corporate Expenses --Treasurer's 171,200 General Corporate Oficers' Salarles 378,000 The company operates three support departments: the Dispatching Department, the Equipment Management Department, and the Treasurer's Department. The Dispatching Department manages the scheduling and releasing of completed trains. The Equipment Management Department manages the railroad cars inventories. It makes sure the right freight cars are at the right place at the right time. The Treasurer's Department conducts a variety of services for the company as a whole. The following additional information has been gathered: North South West the right place at the right time. The Treasurer's Department conducts a variety of services for the company as a whole. The following additional information has been gathered: North South West Number of scheduled trains 5,800 6,900 10,300 Number of railroad cars in Inventory 1,300 2,000 1,700 Required: 1. Prepare quarterly income statements showing operating Income for the three regions. Use three column headings: North, South, and West. Do not round your interim calculations Thomas Railroad Company Divisional Income Statements For the Quarter Ended December 31 North South West Revenues 1.125.600 1.317.500 2.351.900 Operating expenses 713.300 74.100 1.422.300 412,300 $33.400 929.00 Operating income before support department allocations Support department allocations: Dispatching Equipment Management 150.00 179.400 267.800 SR 500 0.00 4 7600 209,300 269.400 300 Total support department allocations 41.600 x SUR SOX 699,600 X Operating income Previous 212300 33.400 929.00 179400 267,800 Operating income before support department allocations Support department allocations Dispatching Equipment Management Total support department allocations Operating income 150,00 $8.500 90,000 76,500 209,300 26.400 344300 418,600 X 585,800 x 99,600 X Ees 2. What is the profit margin of each region? Round to one decimal place. Region Profit Margin North Region 37 X % South Region 40 X 4 West Region 29 X % Identify the most successful region according to the profit margin South 3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the regions? a. The method used to evaluate the performance of the regions should be reevaluated. b. A better regional performance measure would be the return on investment (operating income divided by regional Previous Check My Workmore Check My Work utot romaining 2022031 stateme...6! eBook Show Me How 2. What is the profit margin of each region? Round to one decimal place. Region Profit Margin 1) North Region 37 X % 29 X % South Region 40 X % West Region Identify the most successful region according to the profit margin, South 3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the regions? a. The method used to evaluate the performance of the regions should be reevaluated. b. A better regional performance measure would be the return on investment operating income divided by regional assets). c. A better regional performance measure would be the residual income (operating income less a minimal return on regional assets). d. None of these choices would be included. e. All of these choices (a, b & c) would be included. e Feedback