Profit center responsibility reporting for a service company Instructions Quarterly Income Statements Final Questions X Instructions Traxonia Railroad 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, 2016: RevenuesEast $ 888,000 RevenuesWest 1,032,000 RevenuesCentral 1,870,000 Operating ExpensesEast 567,500 Operating ExpensesWest 625,200 Operating ExpensesCentral 1,173,140 Corporate ExpensesShareholder Relations 152,000 Corporate ExpensesCustomer Support 340,000 Corporate ExpensesLegal 272,600 General Corporate Officers Salaries 282,500 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 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: East West Central Number of customer contacts 5,000 6,000 9,000 Number of hours billed 1,350 2,000 2,450 Required: 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. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the divisions? X Quarterly Income Statements 1. Prepare quarterly income statements showing income from operations for the three divisions. Use three column headings: East, West, and Central. TRAXONIA RAILROAD INC. Divisional Income Statements For the Quarter Ended December 31, 2016 1 East West Central 2 Revenues 3 Operating expenses 4 Income from operations before service department charges 5 Less service department charges: 6 Customer Support 7 Legal 8 Total service department charges 9 Income from operations