eBook Profit Center Responsibility Reporting Carry On Freight Inc. has three regional divisions organized 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, 20Y3. Revenues-Air Division Revenues-Rail Division Revenues-Truck Division $ 1,083,300 1,296,000 2,237,800 Operating Expenses-Air Division 686,500 Operating Expenses-Rail Division 771,300 Operating Expenses-Truck Division 1,353,300 Corporate Expenses-Shareholder Relations 164,800 Corporate Expenses-Customer Support 550,400 Corporate Expenses-Legal General Corporate Officers' Salaries 243,600 363,800 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: Number of customer contacts Number of hours billed Air Rail Truck 4,300 5,200 7,700 1,100 1,700 1,400 Division management does not control activities related to the shareholder relations department and general corporate officers' salaries. Required: Check My Work 9 more Check My Work uses remaining. Previous eBook Division management does not control activities related to the shareholder relations department and general corporate officer salaries. Required: 1. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: Air, Rail, and Truck. Carry On Freight Inc. Divisional Income Statements For the Quarter Ended December 31, 20Y3 Revenues Operating expenses Operating income before service department charges Less service department charges: Customer support Legal Total service department charges Operating income Feedback Air Rail Truck 1,083,300 $ 1,296,000 $ 2,237,800 686,500 771,300 V 1,353,300 396,800 $ 524,700 0000 1320 884,500 $1000 Check My Work 1. Determine the customer contact rate by dividing service cost by output. For each division's customer support, multiply the customer contact rate by number of customer contacts. Repeat this process for the other service department charges. Subtract the service department charges for a division from division's operating income before such charges. 2. What is the profit margin percentage of each division? Round to one decimal place. eBook 2. What is the profit margin percentage of each division? Round to one decimal place. Division Air Division Rail Division Truck Division Profit Margin % % % Identify the most successful division according to the profit margin percentage. Truck Division 3. Complete the memo to the CEO for a better method for evaluating the performance of the divisions. In your recommendation, identify the major weakness present method. You might include the following: Feedback -MEMORANDUM- --1 TO: CEO FROM: Accountant SUBJECT: Methods to Evaluate Division Performance The method used to evaluate the performance of the divisions should be reevaluated. The present method identifies the amount of that would satisfy the responsibilities of significant investment in per dollar of earned revenue. This is a measure However, this company requires a The present measure fails to incorporate the impact of into the measure. Therefore, two better measures of divisional performance would be that are used in