PR 23-2A

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PR 23-2A Profit center responsibility reporting for a service company OBJ.3 Traxonia Railroad Inc. has three regional divisions organized as protit 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, 2016: SHOW ME HOW Revenues-East Revenues-West Revenues-Central Operating Expenses-East Operating Expenses-West Operating Expenses- Central Corporate Expenses Shareholder Relations Corporate Expenses Customer Support Corporate Expenses-Legal General Corporate Officers'Salaries 870,000 ,032,000 1872,000 63,300 618,240 ,166,940 54,000 00,000 270,000 275,000 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 East West Central 5,000 6,000 9,000 1350 2,160 1,890 Instructions 1. Prepare quarterly income statements showing income from operations for the three divisions. Use three column headings: East, West, and Central Answer Check Figure: Income from operations, Central Division, $430,560 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