(PR 8-2A) Profit center responsibility reporting Johnson Products Inc. has three regional divisions organized as profit 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, 2012: RevenuesEast $ 720,000 RevenuesWest 860,000 RevenuesCentral 1,560,000 Operating ExpensesEast 456,150 Operating ExpensesWest 511,700 Operating ExpensesCentral 943,550 Corporate ExpensesShareholder Relations 112,000 Corporate ExpensesCustomer Support 385,000 Corporate ExpensesLegal 152,000 General Corporate Officers Salaries 240,000

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 companys point of contact for new service, complaints, and requests for repair. The department be- lieves 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: East West Central Number of customer contacts 4,375 5,250 7,875 Number of hours billed 950 1,520 1,330 Instructions 1. Prepare quarterly income statements showing income from operations for the three divisions. Use three column headings: East, West, and Central. 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.