Ch 24 HOMEWORK Pr 24-2B PR.24.02.ALGO Progress:1/1 items Question Content Area Profit Center Responsibility Reporting for a Service Company 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 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: Revenues—N Region $1,190,800 Revenues—S Region 1,387,900 Revenues—W Region 2,598,600 Operating Expenses—N Region 754,600 Operating Expenses—S Region 826,000 Operating Expenses—W Region 1,571,500 Corporate Expenses—Dispatching 684,000 Corporate Expenses—Equipment Management 201,600 Corporate Expenses—Treasurer’s 181,100 General Corporate Officers’ Salaries 399,900 The company operates three service departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s Department. The Treasurer’s Department and general corporate officers’ salaries are not controllable by division management. The Dispatching Department manages the scheduling and releasing of completed trains. The Equipment Management Department manages the inventories of railroad cars. It makes sure the right freight cars are at the right place at the right time. The Treasurer’s Department conducts a variety of services for the company as a whole. The following additional information has been gathered:   North South West Number of scheduled trains 5,700   6,800   10,300   Number of railroad cars in inventory 1,200   1,900   1,700   Required: Question Content Area 1.  Prepare quarterly income statements showing income from operations for the three regions. Use three column headings: North, South, and West. Do not round your interim calculations. Thomas Railroad Company Divisional Income Statements For the Quarter Ended December 31 North South West Revenues $fill in the blank dfbed8028f9efbc_1 $fill in the blank dfbed8028f9efbc_2 $fill in the blank dfbed8028f9efbc_3 Operating expenses fill in the blank dfbed8028f9efbc_4 fill in the blank dfbed8028f9efbc_5 fill in the blank dfbed8028f9efbc_6 Income from operations before service department charges $fill in the blank dfbed8028f9efbc_7 $fill in the blank dfbed8028f9efbc_8 $fill in the blank dfbed8028f9efbc_9 Less service department charges: Dispatching $fill in the blank dfbed8028f9efbc_10 $fill in the blank dfbed8028f9efbc_11 $fill in the blank dfbed8028f9efbc_12 Equipment Management fill in the blank dfbed8028f9efbc_13 fill in the blank dfbed8028f9efbc_14 fill in the blank dfbed8028f9efbc_15 Total service department charges $fill in the blank dfbed8028f9efbc_16 $fill in the blank dfbed8028f9efbc_17 $fill in the blank dfbed8028f9efbc_18 Income from operations $fill in the blank dfbed8028f9efbc_19 $fill in the blank dfbed8028f9efbc_20 $fill in the blank dfbed8028f9efbc_21 Question Content Area 2.  What is the profit margin of each division? Round to one decimal place. Region Profit Margin North Region fill in the blank bdce43f7804406d_1% South Region fill in the blank bdce43f7804406d_2% West Region fill in the blank bdce43f7804406d_3% Identify the most successful region 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? The method used to evaluate the performance of the divisions should be reevaluated. A better divisional performance measure would be the rate of return on investment (income from operations divided by divisional assets). A better divisional performance measure would be the residual income (income from operations less a minimal return on divisional assets). None of these choices would be included. All of these choices (a, b & c) would be included.