Haley Romeros had just been appointed vice president of the Rocky Mountain Region of the Bank Services Corporation (BSC). The company provides check processing services for small banks. The banks send checks presented for deposit or payment to BSC, which records the data on each check in a computerized database. BSC then sends the data electronically to the nearest Federal Reserve Bank check-clearing center where the appropriate transfers of funds are made between banks. The Rocky Mountain Region has three check processing centers, which are located in Billings, Montana; Great Falls, Montana; and Clayton, Idaho. Prior to her promotion to vice president, Ms. Romeros had been the manager of a check processing center in New Jersey Immediately after assuming her new position, Ms. Romeros requested a complete financial report for the just-ended fiscal year from the region's controller, John Littlebear. Ms. Romeros specified that the financial report should follow the standardized format required by corporate headquarters for all regional performance reports. That report follows: Bank Services Corporation (BSC) Rocky Mountain Region Financial Performance Check Processing Centers BillingsGreat Falls Clayton Total Sales S17,000,000 $7,000,000 $8,000,000 2,000,000 Operating expenses: Direct labor Variable overhead Equipment depreciation Facility expense Local administrative expense 9,100,000 3,200,000 4,200,000 1,700,000 94,000 420,000 970,000 116,000 60,000 160,000 442,000 179,000 2,274,000 952,000 2,530,000 880,000 146,000 510,000 210,000 1,360,000 560,000 169,000 902,000 680,000 176,000 240,000 640,000 438,000 egional administrative ex Corporate administrative expense Total operating expense 16,654,000 6,127,000 7,007,000 3,520,000 Net operating income (loss) S 346,000 S 873,000 993,000 S(1,520,000) Local administrative expenses are the administrative expenses incurred at the check processing centers. tRegional administrative expenses are allocated to the check processing centers based on sales tCorporate administrative expenses are charged to segments of the company such as the Rocky Mountain Region and the check processing centers at the rate of 8% of their sales