Profit Center Responsibility Reporting for a Service Company

Thomas Railroad Company organizes its three divisions , the North (N), the South (S), the West (W), 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 balance as of December 31m

Revenues-N Region. $1,119,800

Revenues-S Region. 1,302,900

Revenues-W Region. 2,418,200

Operating expenses-N Region. 709,600

Operating expenses-S Region. 775,400

Operating expenses-W Region. 1,462,400

Corporate Expense-Dispatching. 648,000

Corporate Expense-Equipment management 180,600

Corporate Expense-Treasures. 170,300

General corporate officers salaries. 376,100

The company operates three service departments: the dispatching department, the Equipment Management Department, and the treasures Department. The dispatching department manages the scheduling and releasing of complete trains. The Equipment Management Department manages the railroadcars inventories. It makes sure the right freight cars are at the right place at the right time. The treasures Department conducts a variety of services for the company as a whole. The following additional information has been gathered:

North. South. West

Number of shedualed trains. 5,400. 6,500. 9,700

Number of railroad cars in inventory. 1,100. 1,700. 1,500

Prepare quarterly income statements showing income from operations for the three regions. Use three column headings: North, South, West. Do not round your interim calculations.

Thomas Railroad Company

Divisional Income Statements

For the Quarter Ending December 31

North South. West

Revenues.

Operating expenses

Income from operations before service department changes

Service department charges

Dispatching

Equipment Management

Total service department

Income from operations

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

Region. Profit margin

North Region. %

South Region. %

West Region. %

Identify the most successful region accounts to the profit margin ?

North Region south Region or west Region?

3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the divisions?