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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Profit center responsibility reporting

A-One 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.


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:

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

Instructions

Identify the most successful division according to operating income as a percent of revenues. Round to one decimal place.

To determine

Concept Introduction:

Income Statement: It shows the income of organization of a particular period. In this statement we reduce all type of expenses from the revenue of the firm.

Profit Margins: It is a measure which is generally used by the organization to find out the best department in the organization in terms of profit. To calculate the profit margins divide the profits with sales.

To Calculate:

Find percentage of operating income on revenues.

Explanation
    Income Statement
    ParticularsAmount
    Air DivisionRail DivisionTruck Division
    Sales500000060000009000000
    Less: Operating Expenses410000049000007555000
    Gross profit

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