Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates

Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, 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:

Line Item Description Amount
RevenuesN Region $1,289,700
RevenuesS Region 1,468,200
RevenuesW Region 2,800,700
Operating ExpensesN Region 817,300
Operating ExpensesS Region 873,800
Operating ExpensesW Region 1,693,700
Corporate ExpensesDispatching 775,200
Corporate ExpensesEquipment Management 174,800
Corporate ExpensesTreasurers 196,200
General Corporate Officers Salaries 433,200

The company operates three support departments: the Dispatching Department, the Equipment Management Department, and the Treasurers Department. The Dispatching Department manages the scheduling and releasing of completed trains. The Equipment Management Department manages the railroad cars inventories. It makes sure the right freight cars are at the right place at the right time. The Treasurers Department conducts a variety of services for the company as a whole. The following additional information has been gathered:

Line Item Description North South West
Number of scheduled trains 5,700 6,800 10,300
Number of railroad cars in inventory 1,000 1,500 1,300

image text in transcribed

3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the regions? a. The method used to evaluate the performance of the regions should be reevaluated. b. A better regional performance measure would be the return on investment (operating income divided by regional assets). c. A better regional performance measure would be the residual income (operating income less a minimal return on regional assets). d. None of these choices would be included. e. All of these choices (a, b & c) would be included.

Divisional Income Statements For the Quarter Ended December 31 2. What is the profit margin of each region? Round to one decimal place. Identify the most successful region according to the profit margin

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Accounting For Decision Makers

Authors: Dr Peter Atrill, Eddie McLaney

6th Edition

0273731521, 9780273731528

More Books

Students also viewed these Accounting questions