Obj.3 tive officer o Sorganized as profit centers. The chief execu- operating income as a percent of ise accounts were provided from the 4-2 Profit center responsibility reporting One Freight Inc. has three regional divisions organized as profit centers. The officer (CEO) evaluates divisional performance using operating income wes. The following quarterly income and expense accounts were al balance as of December 31, 20Y3. Revenues-Air Division $5,000,000 Revenues-Rail Division Revenues-Truck Division 9,000,000 Operating Expenses-Air Division 4,100,000 Operating Expenses-Rail Division 4,900,000 Operating Expenses--Truck Division 7,555,000 Corporate Expenses-Shareholder Relations 220,000 Corporate Expenses-Customer Support 990,000 Corporate Expenses--Legal 880,000 General Corporate Officers' Salaries 500,000 1. Operating income, Air Division, $753,300 6,000,000 The company operates three service departments Shareholder Relations. Customer Sup- port, and Legal. The Shareholde departments: Shareholder Relations, Customer Sup- shareholders of the company. The Customer Support Department is the company's pom s Department conducts a variety of services for 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: Air Rail Truck Number of customer contacts 1,500 4,500 16,000 Number of hours billed 900 2,400 6,700 Division management does not control activities related to the shareholder relations department and general corporate officers' salaries. Instructions 1. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: Air, Rail, and Truck. 2. Identify the most successful division according to operating income as a percent of revenues. Round to one decimal place. 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