70.2K

Verified Solution

Link Copied!

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:

RevenuesN Region	$942,100
RevenuesS Region	1,115,000
RevenuesW Region	1,983,800
Operating ExpensesN Region	597,000
Operating ExpensesS Region	663,600
Operating ExpensesW Region	1,199,700
Corporate ExpensesDispatching	472,800
Corporate ExpensesEquipment Management	220,800
Corporate ExpensesTreasurers	143,300
General Corporate Officers Salaries	316,400

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:

	North		South		West
Number of scheduled trains	4,900		5,900		8,900
Number of railroad cars in inventory	1,200		1,800		1,600

Required:

1. Prepare quarterly income statements showing operating income 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	$	$	$
Operating expenses
Operating income before support department allocations	$	$	$
Support department allocations:
Dispatching	$	$	$
Equipment Management
Total support department allocations	$	$	$
Operating income	$	$	$

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

Region	Profit Margin
North Region	%
South Region	%
West Region	%

Answer & Explanation Solved by verified expert

See Answer