Profit Center Responsibility Reporting Carry On 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, 2013 Revenues-Air Division 5 834,600 Revenues-Rail Division 992,700 Revenues-Truck Division 1,823.100 Operating Expenses-Air Division 528,900 Operating Expenses-Rail Division 590.800 Operating Expenses-Truck Division 1,102.500 Corporate Expenses-Shareholder Relations 126.000 Corporate Expenses-Customer Support 448,600 Corporate Expenses Legal 176,300 280.300 General Corporate Officers Salaries The company operates three service departments: Shareholder Relations, Customer Support, and Legal The Shareholder settent conducts a variety of services for shareholders of the contpary. The customer Support Department is the comme point of contact formsen complaints and requests for repale The department believes that the number of customer contacts is an activity base for the Department provides legal services for division management. The department beleves that the number of our dis an actity testo The following additional information has been gathered: us Ivy TO 1 Air Rail Truck Number of customer contacts 5,100 6,100 9,200 Number of hours billed 1,000 1,600 1,500 Division management does not control activities related to the shareholder relations department and general corporate officers' salaries. Required: 1. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: Alr, Rail, and Truck Carry On Freight Inc. Divisional Income Statements For the Quarter Ended December 31, 2013 Air Rail Truck Less service department charges: Total service department charges Operating income SULUcator unprogre... 2. What is the profit margin percentage of each division? Round to one decimal place. o Division Profit Margin Alr Division % Rail Division 9% Truck Division 36 Identify the most successful division according to the profit margin percentage 3. Complete the memo to the ceo for a better method for evaluating the performance of the division in your recommendation, derely the major weakness of the present method. You might include the following MEMORANDUM TO: CEO FROM: Accountant SUBJECT: Methods to evaluate Division Performance The method used to evaluate the performance of the divisions should be revaluated. The present method Identifies the amount of per dollar of earned revenue. This is measure that would satisfy the responsibilities of However this comes sonificant investment in The presentare fails to incorporate the impacto to the measure. Therefore, the better meatures of divinal Deformat be that are used in (non
