Profit center responsibility reporting for a service company Red Line Railroad 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: Revenues-East $1,400,000 Revenues-West 2,000,000 3,200,000 Revenues-Central Operating Expenses-East 800,000 Operating Expenses-West 1,350,000 Operating Expenses-Central 1,900,000 Corporate Expenses-Shareholder Relations 300,000 320,000 Corporate Expenses-Customer Support Corporate Expenses Legal General Corporate Officers' Salaries 500,000 1,200,000 The company operates three support 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 a cost driver for this work. The Legal Department provides legal services for division management. The department believes that the number of hours billed is a cost driver for this work. The following additional information has been gathered: East West Central Number of customer contacts 1,500 2,800 5,700 Number of hours billed 750 1,750 1,500 Required: Required: 1. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: East, West, and Central. Red Line Railroad Inc. Divisional Income Statements For the Quarter Ended December 31 East West Central Revenues Operating expenses $ Operating income before support department allocations Support department allocations: Customer Support Legal $ Total support department allocations | Operating income Feedback Check My Work 1. Responsibility accounting for profit centers focuses on reporting revenues, expenses and operating income. Thus, responsibility accounting reports for profit centers take the form of income statements. Profit centers income statements should include only revenue and expenses that are controlled by the manger. Controllable revenue are revenues earned by the profit center and controlled expenses are costs that can be influenced (controlled by the decisions of profit center mangers. 2. What is the profit margin of each region? Round percentages to the nearest whole number. Division Profit Margin East Region % West Region % Central Region % Identify the most successful region according to the profit margin. East