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Profit Center Responsibility Reporting Bunn Freight Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance using operating

Profit Center Responsibility Reporting

Bunn 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.

Line Item DescriptionAmount
Revenues—Air Division$ 33,300
Revenues—Land Division38,000
Revenues—Water Division73,100
Operating Expenses—Air Division21,100
Operating Expenses—Land Division22,600
Operating Expenses—Water Division44,200
Corporate Expenses—Customer Support515,000
Corporate Expenses—Legal266,500
General Corporate Officers' Salaries11,200

The company operates two service departments: Customer Support and Legal. The Customer Support Department is the company's point of contact for new service, complaints, and requests for repair. The Legal Department provides legal services for division management. The following amounts were billed back to each division:

Line Item Description   Air   Land   Water
Customer support department service charges$5,200$6,200$9,200
Legal department service charges1,0001,6001,500

Division management does not control the general corporate officers' salaries.

Required:

Question Content Area

 

1.  Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: Air, Land, and Water.

Line Item DescriptionAirLandWater
Accounts receivableCashNet incomeRevenues$- Select -$- Select -$- Select -
Accounts receivableCashNet incomeOperating expenses

- Select -

- Select -

- Select -

CashCustomer Support DepartmentOperating income before service department chargesNet income$- Select -$- Select -$- Select -
Less service department charges:   
Accounts payableCashCustomer Support DepartmentRevenues$- Select -$- Select -$- Select -
CashLegal DepartmentManufacturing department chargesRevenues

- Select -

- Select -

- Select -

Total service department charges$Total service department charges$Total service department charges$Total service department charges
Operating income$Operating income$Operating income$Operating income

 

Question Content Area

 

2.  What is the profit margin percentage of each division? Round to one decimal place.

DivisionProfit Margin
Air Division

fill in the blank 1 of 3 %

Land Division

fill in the blank 2 of 3 %

Water Division

fill in the blank 3 of 3 %

 


 

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