Profit Center Responsibility Reporting Carry On Freight 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, 20Y3. Revenues—Air Division $ 1,226,300 Revenues—Rail Division 1,443,700 Revenues—Truck Division 2,576,000 Operating Expenses—Air Division 777,100 Operating Expenses—Rail Division 859,200 Operating Expenses—Truck Division 1,557,800 Corporate Expenses—Shareholder Relations 186,500 Corporate Expenses—Customer Support 678,000 Corporate Expenses—Legal 222,300 General Corporate Officers' Salaries 411,900 The company operates three service 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 an activity base for this work. The Legal Department provides legal services for division management. The department believes that the number of hours billed is an activity base for this work. The following additional information has been gathered: Air Rail Truck Number of customer contacts 5,700 6,800 10,100 Number of hours billed 1,000 1,600 1,300 Division management does not control activities related to the shareholder relations department and general corporate officers' salaries. Required: 1. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: Air, Rail, and Truck. Carry On Freight Inc.Divisional Income StatementsFor the Quarter Ended December 31, 20Y3 Air Rail Truck $Revenues $Revenues $Revenues Operating expenses Operating expenses Operating expenses $Operating income before service department charges $Operating income before service department charges $Operating income before service department charges Less service department charges: $Customer support $Customer support $Customer support Legal Legal Legal Total service department charges $fill in the blank 510bcefa0f8f040_21 $fill in the blank 510bcefa0f8f040_22 $fill in the blank 510bcefa0f8f040_23 Operating income $fill in the blank 510bcefa0f8f040_24 $fill in the blank 510bcefa0f8f040_25 $fill in the blank 510bcefa0f8f040_26 Feedback 2. What is the profit margin percentage of each division? Round to one decimal place. Division Profit Margin Air Division fill in the blank 5bc8ac032f97013_1 % Rail Division fill in the blank 5bc8ac032f97013_2 % Truck Division fill in the blank 5bc8ac032f97013_3 % Identify the most successful division according to the profit margin percentage.

Profit Center Responsibility Reporting Carry On Freight 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, 20Y3. Revenues—Air Division $ 1,226,300 Revenues—Rail Division 1,443,700 Revenues—Truck Division 2,576,000 Operating Expenses—Air Division 777,100 Operating Expenses—Rail Division 859,200 Operating Expenses—Truck Division 1,557,800 Corporate Expenses—Shareholder Relations 186,500 Corporate Expenses—Customer Support 678,000 Corporate Expenses—Legal 222,300 General Corporate Officers' Salaries 411,900 The company operates three service 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 an activity base for this work. The Legal Department provides legal services for division management. The department believes that the number of hours billed is an activity base for this work. The following additional information has been gathered: Air Rail Truck Number of customer contacts 5,700 6,800 10,100 Number of hours billed 1,000 1,600 1,300 Division management does not control activities related to the shareholder relations department and general corporate officers' salaries. Required: 1. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: Air, Rail, and Truck. Carry On Freight Inc.Divisional Income StatementsFor the Quarter Ended December 31, 20Y3 Air Rail Truck $Revenues $Revenues $Revenues Operating expenses Operating expenses Operating expenses $Operating income before service department charges $Operating income before service department charges $Operating income before service department charges Less service department charges: $Customer support $Customer support $Customer support Legal Legal Legal Total service department charges $fill in the blank 510bcefa0f8f040_21 $fill in the blank 510bcefa0f8f040_22 $fill in the blank 510bcefa0f8f040_23 Operating income $fill in the blank 510bcefa0f8f040_24 $fill in the blank 510bcefa0f8f040_25 $fill in the blank 510bcefa0f8f040_26 Feedback 2. What is the profit margin percentage of each division? Round to one decimal place. Division Profit Margin Air Division fill in the blank 5bc8ac032f97013_1 % Rail Division fill in the blank 5bc8ac032f97013_2 % Truck Division fill in the blank 5bc8ac032f97013_3 % Identify the most successful division according to the profit margin percentage.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 2PA: Profit center responsibility reporting for a service company Red Line Railroad Inc. has three...

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Profit Center Responsibility Reporting

Carry On Freight 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, 20Y3.

Revenues—Air Division	$ 1,226,300
Revenues—Rail Division	1,443,700
Revenues—Truck Division	2,576,000
Operating Expenses—Air Division	777,100
Operating Expenses—Rail Division	859,200
Operating Expenses—Truck Division	1,557,800
Corporate Expenses—Shareholder Relations	186,500
Corporate Expenses—Customer Support	678,000
Corporate Expenses—Legal	222,300
General Corporate Officers' Salaries	411,900

The company operates three service 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 an activity base for this work. The Legal Department provides legal services for division management. The department believes that the number of hours billed is an activity base for this work. The following additional information has been gathered:

	Air	Rail	Truck
Number of customer contacts	5,700		6,800	10,100
Number of hours billed	1,000		1,600	1,300

Division management does not control activities related to the shareholder relations department and general corporate officers' salaries.

Required:

1. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: Air, Rail, and Truck.

Carry On Freight Inc.Divisional Income StatementsFor the Quarter Ended December 31, 20Y3

	Air	Rail	Truck
	$Revenues	$Revenues	$Revenues
	Operating expenses	Operating expenses	Operating expenses
	$Operating income before service department charges	$Operating income before service department charges	$Operating income before service department charges
Less service department charges:
	$Customer support	$Customer support	$Customer support
	Legal	Legal	Legal
Total service department charges	$fill in the blank 510bcefa0f8f040_21	$fill in the blank 510bcefa0f8f040_22	$fill in the blank 510bcefa0f8f040_23
Operating income	$fill in the blank 510bcefa0f8f040_24	$fill in the blank 510bcefa0f8f040_25	$fill in the blank 510bcefa0f8f040_26

Feedback

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

Division	Profit Margin
Air Division	fill in the blank 5bc8ac032f97013_1 %
Rail Division	fill in the blank 5bc8ac032f97013_2 %
Truck Division	fill in the blank 5bc8ac032f97013_3 %

Identify the most successful division according to the profit margin percentage.

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