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 $986,900 Revenues—S Region 1,186,300 Revenues—W Region 2,027,500 Operating Expenses—N Region 625,400 Operating Expenses—S Region 706,000 Operating Expenses—W Region 1,226,100 Corporate Expenses—Dispatching 485,000 Corporate Expenses—Equipment Management 237,900 Corporate Expenses—Treasurer’s 150,100 General Corporate Officers’ Salaries 331,500 The company operates three service departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s 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 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 4,900 5,800 8,700 Number of railroad cars in inventory 1,000 1,600 1,300 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 CompanyDivisional Income StatementsFor the Quarter Ended December 31 North South West Revenues $fill in the blank 47e65dfcb005066_1 $fill in the blank 47e65dfcb005066_2 $fill in the blank 47e65dfcb005066_3 Operating expenses fill in the blank 47e65dfcb005066_4 fill in the blank 47e65dfcb005066_5 fill in the blank 47e65dfcb005066_6 Income from operations before service department charges $fill in the blank 47e65dfcb005066_7 $fill in the blank 47e65dfcb005066_8 $fill in the blank 47e65dfcb005066_9 Service department charges: Dispatching $fill in the blank 47e65dfcb005066_10 $fill in the blank 47e65dfcb005066_11 $fill in the blank 47e65dfcb005066_12 Equipment Management fill in the blank 47e65dfcb005066_13 fill in the blank 47e65dfcb005066_14 fill in the blank 47e65dfcb005066_15 Total service department charges $fill in the blank 47e65dfcb005066_16 $fill in the blank 47e65dfcb005066_17 $fill in the blank 47e65dfcb005066_18 Income from operations $fill in the blank 47e65dfcb005066_19 $fill in the blank 47e65dfcb005066_20 $fill in the blank 47e65dfcb005066_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 ed1e720a601b063_1 % South Region fill in the blank ed1e720a601b063_2 % West Region fill in the blank ed1e720a601b063_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

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 $986,900 Revenues—S Region 1,186,300 Revenues—W Region 2,027,500 Operating Expenses—N Region 625,400 Operating Expenses—S Region 706,000 Operating Expenses—W Region 1,226,100 Corporate Expenses—Dispatching 485,000 Corporate Expenses—Equipment Management 237,900 Corporate Expenses—Treasurer’s 150,100 General Corporate Officers’ Salaries 331,500 The company operates three service departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s 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 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 4,900 5,800 8,700 Number of railroad cars in inventory 1,000 1,600 1,300 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 CompanyDivisional Income StatementsFor the Quarter Ended December 31 North South West Revenues $fill in the blank 47e65dfcb005066_1 $fill in the blank 47e65dfcb005066_2 $fill in the blank 47e65dfcb005066_3 Operating expenses fill in the blank 47e65dfcb005066_4 fill in the blank 47e65dfcb005066_5 fill in the blank 47e65dfcb005066_6 Income from operations before service department charges $fill in the blank 47e65dfcb005066_7 $fill in the blank 47e65dfcb005066_8 $fill in the blank 47e65dfcb005066_9 Service department charges: Dispatching $fill in the blank 47e65dfcb005066_10 $fill in the blank 47e65dfcb005066_11 $fill in the blank 47e65dfcb005066_12 Equipment Management fill in the blank 47e65dfcb005066_13 fill in the blank 47e65dfcb005066_14 fill in the blank 47e65dfcb005066_15 Total service department charges $fill in the blank 47e65dfcb005066_16 $fill in the blank 47e65dfcb005066_17 $fill in the blank 47e65dfcb005066_18 Income from operations $fill in the blank 47e65dfcb005066_19 $fill in the blank 47e65dfcb005066_20 $fill in the blank 47e65dfcb005066_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 ed1e720a601b063_1 % South Region fill in the blank ed1e720a601b063_2 % West Region fill in the blank ed1e720a601b063_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

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 2PB

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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 CompanyDivisional Income StatementsFor the Quarter Ended December 31

	North	South	West
Revenues	$fill in the blank 47e65dfcb005066_1	$fill in the blank 47e65dfcb005066_2	$fill in the blank 47e65dfcb005066_3
Operating expenses	fill in the blank 47e65dfcb005066_4	fill in the blank 47e65dfcb005066_5	fill in the blank 47e65dfcb005066_6
Income from operations before service department charges	$fill in the blank 47e65dfcb005066_7	$fill in the blank 47e65dfcb005066_8	$fill in the blank 47e65dfcb005066_9
Service department charges:
Dispatching	$fill in the blank 47e65dfcb005066_10	$fill in the blank 47e65dfcb005066_11	$fill in the blank 47e65dfcb005066_12
Equipment Management	fill in the blank 47e65dfcb005066_13	fill in the blank 47e65dfcb005066_14	fill in the blank 47e65dfcb005066_15
Total service department charges	$fill in the blank 47e65dfcb005066_16	$fill in the blank 47e65dfcb005066_17	$fill in the blank 47e65dfcb005066_18
Income from operations	$fill in the blank 47e65dfcb005066_19	$fill in the blank 47e65dfcb005066_20	$fill in the blank 47e65dfcb005066_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 ed1e720a601b063_1 %
South Region	fill in the blank ed1e720a601b063_2 %
West Region	fill in the blank ed1e720a601b063_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.

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Revenues—N Region	$986,900
Revenues—S Region	1,186,300
Revenues—W Region	2,027,500
Operating Expenses—N Region	625,400
Operating Expenses—S Region	706,000
Operating Expenses—W Region	1,226,100
Corporate Expenses—Dispatching	485,000
Corporate Expenses—Equipment Management	237,900
Corporate Expenses—Treasurer’s	150,100
General Corporate Officers’ Salaries	331,500

	North	South	West
Number of scheduled trains	4,900		5,800	8,700
Number of railroad cars in inventory	1,000		1,600	1,300