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 | $1,030,800 |
Revenues—S Region | 1,192,300 |
Revenues—W Region | 2,190,000 |
Operating Expenses—N Region | 653,200 |
Operating Expenses—S Region | 709,600 |
Operating Expenses—W Region | 1,324,400 |
Corporate Expenses—Dispatching | 567,500 |
Corporate Expenses—Equipment Management | 188,600 |
Corporate Expenses—Treasurer’s | 156,800 |
General Corporate Officers’ Salaries | 346,200 |
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 | 5,700 | 6,800 | 10,200 | |||
Number of railroad cars in inventory | 1,200 | 1,800 | 1,600 |
Required:
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 | |||
Operating expenses | |||
Income from operations before service department charges | |||
Service department charges: | |||
Dispatching | |||
Equipment Management | |||
Total service department charges | |||
Income from operations |
2. What is the profit margin of each division? Round to one decimal place.
Region | Profit Margin |
North Region | fill in the blank |
South Region | fill in the blank |
West Region | fill in the blank |
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?
Profit Center Responsibility Reporting
XSport Sporting Goods Co. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:
Sales—Winter Sports Division | $34,650,000 |
Sales—Summer Sports Division | 38,280,000 |
Cost of Goods Sold—Winter Sports Division | 20,790,000 |
Cost of Goods Sold—Summer Sports Division | 22,110,000 |
Sales Expense—Winter Sports Division | 5,940,000 |
Sales Expense—Summer Sports Division | 5,280,000 |
Administrative Expense—Winter Sports Division | 3,465,000 |
Administrative Expense—Summer Sports Division | 3,399,000 |
Advertising Expense | 946,000 |
Transportation Expense | 476,800 |
Accounts Receivable Collection Expense | 228,800 |
Warehouse Expense | 3,300,000 |
The bases to be used in allocating expenses, together with other essential information, are as follows:
Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Do not round your interim calculations.
XSport Sporting Goods Co. | ||
Divisional Income Statements | ||
For the Year Ended December 31, 20Y9 | ||
Winter Sports Division | Summer Sports Division | |
Sales | $fill in the blank ef6b8afeb032ffb_1 | $fill in the blank ef6b8afeb032ffb_2 |
Cost of goods sold | fill in the blank ef6b8afeb032ffb_3 | fill in the blank ef6b8afeb032ffb_4 |
Gross profit | $fill in the blank ef6b8afeb032ffb_5 | $fill in the blank ef6b8afeb032ffb_6 |
Divisional selling and administrative expenses: | ||
Divisional selling expenses | $fill in the blank ef6b8afeb032ffb_7 | $fill in the blank ef6b8afeb032ffb_8 |
Divisional administrative expenses | fill in the blank ef6b8afeb032ffb_9 | fill in the blank ef6b8afeb032ffb_10 |
Total divisional selling and administrative expenses | $fill in the blank ef6b8afeb032ffb_11 | $fill in the blank ef6b8afeb032ffb_12 |
Income from operations before service department charges | $fill in the blank ef6b8afeb032ffb_13 | $fill in the blank ef6b8afeb032ffb_14 |
Service department charges: | ||
Advertising expense | $fill in the blank ef6b8afeb032ffb_15 | $fill in the blank ef6b8afeb032ffb_16 |
Transportation expense | fill in the blank ef6b8afeb032ffb_17 | fill in the blank ef6b8afeb032ffb_18 |
Accounts receivable collection expense | fill in the blank ef6b8afeb032ffb_19 | fill in the blank ef6b8afeb032ffb_20 |
Warehouse expense | fill in the blank ef6b8afeb032ffb_21 | fill in the blank ef6b8afeb032ffb_22 |
Total service department charges | $fill in the blank ef6b8afeb032ffb_23 | $fill in the blank ef6b8afeb032ffb_24 |
Income from operations | $fill in the blank ef6b8afeb032ffb_25 | $fill in the blank ef6b8afeb032ffb_26 |
Provide supporting schedules for determining service department charges. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.
XSport Sporting Goods Co. | |||
Service Department Charges | |||
For the Year Ended December 31, 20Y9 | |||
Winter Sports Division | Summer Sports Division | Total | |
Advertising expense | $fill in the blank 3b8b27f9cfff03f_1 | $fill in the blank 3b8b27f9cfff03f_2 | $fill in the blank 3b8b27f9cfff03f_3 |
Transportation rate per bill of lading | $fill in the blank 3b8b27f9cfff03f_4 | $fill in the blank 3b8b27f9cfff03f_5 | |
Number of bills of lading | fill in the blank 3b8b27f9cfff03f_6 | fill in the blank 3b8b27f9cfff03f_7 | |
Transportation expense | $fill in the blank 3b8b27f9cfff03f_8 | $fill in the blank 3b8b27f9cfff03f_9 | $fill in the blank 3b8b27f9cfff03f_10 |
Accounts receivable collection rate | $fill in the blank 3b8b27f9cfff03f_11 | $fill in the blank 3b8b27f9cfff03f_12 | |
Number of sales invoices | fill in the blank 3b8b27f9cfff03f_13 | fill in the blank 3b8b27f9cfff03f_14 | |
Accounts receivable collection expense | $fill in the blank 3b8b27f9cfff03f_15 | $fill in the blank 3b8b27f9cfff03f_16 | $fill in the blank 3b8b27f9cfff03f_17 |
Warehouse rate per sq. ft. | $fill in the blank 3b8b27f9cfff03f_18 | $fill in the blank 3b8b27f9cfff03f_19 | |
Number of square feet | fill in the blank 3b8b27f9cfff03f_20 | fill in the blank 3b8b27f9cfff03f_21 | |
Warehouse expense | $fill in the blank 3b8b27f9cfff03f_22 | $fill in the blank 3b8b27f9cfff03f_23 | $fill in the blank 3b8b27f9cfff03f_24 |
Profit Center Responsibility Reporting
Glades Sporting Goods Co. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y8, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:
Sales—Winter Sports Division | $24,255,000 |
Sales—Summer Sports Division | 26,796,000 |
Cost of Goods Sold—Winter Sports Division | 14,553,000 |
Cost of Goods Sold—Summer Sports Division | 15,477,000 |
Sales Expense—Winter Sports Division | 4,158,000 |
Sales Expense—Summer Sports Division | 3,696,000 |
Administrative Expense—Winter Sports Division | 2,425,500 |
Administrative Expense—Summer Sports Division | 2,379,300 |
Advertising Expense | 1,037,000 |
Transportation Expense | 522,000 |
Accounts Receivable Collection Expense | 250,200 |
Warehouse Expense | 2,310,000 |
The bases to be used in allocating expenses, together with other essential information, are as follows:
Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Do not round your interim calculations.
Glades Sporting Goods Co. | ||
Divisional Income Statements | ||
For the Year Ended December 31, 20Y8 | ||
Winter Sports Division |
Summer Sports Division |
|
Sales | $fill in the blank 650ae4fb6f9cffc_1 | $fill in the blank 650ae4fb6f9cffc_2 |
Cost of goods sold | fill in the blank 650ae4fb6f9cffc_3 | fill in the blank 650ae4fb6f9cffc_4 |
Gross profit | $fill in the blank 650ae4fb6f9cffc_5 | $fill in the blank 650ae4fb6f9cffc_6 |
Divisional selling and administrative expenses: | ||
Divisional selling expenses | $fill in the blank 650ae4fb6f9cffc_7 | $fill in the blank 650ae4fb6f9cffc_8 |
Divisional administrative expenses | fill in the blank 650ae4fb6f9cffc_9 | fill in the blank 650ae4fb6f9cffc_10 |
Total divisional selling and administrative expenses | $fill in the blank 650ae4fb6f9cffc_11 | $fill in the blank 650ae4fb6f9cffc_12 |
Income from operations before service department allocations | $fill in the blank 650ae4fb6f9cffc_13 | $fill in the blank 650ae4fb6f9cffc_14 |
Less service department cost allocations: | ||
Advertising expense | $fill in the blank 650ae4fb6f9cffc_15 | $fill in the blank 650ae4fb6f9cffc_16 |
Transportation expense | fill in the blank 650ae4fb6f9cffc_17 | fill in the blank 650ae4fb6f9cffc_18 |
Accounts receivable collection expense | fill in the blank 650ae4fb6f9cffc_19 | fill in the blank 650ae4fb6f9cffc_20 |
Warehouse expense | fill in the blank 650ae4fb6f9cffc_21 | fill in the blank 650ae4fb6f9cffc_22 |
Total | $fill in the blank 650ae4fb6f9cffc_23 | $fill in the blank 650ae4fb6f9cffc_24 |
Income from operations | $fill in the blank 650ae4fb6f9cffc_25 | $fill in the blank 650ae4fb6f9cffc_26 |
Provide supporting schedules for determining service department cost allocations.. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.
Glades Sporting Goods Co. | |||
Service Department Charges | |||
For the Year Ended December 31, 20Y8 | |||
Winter Sports Division |
Summer Sports Division |
Total | |
Advertising expense | $fill in the blank 2d45aa02403efd2_1 | $fill in the blank 2d45aa02403efd2_2 | $fill in the blank 2d45aa02403efd2_3 |
Transportation rate per bill of lading | $fill in the blank 2d45aa02403efd2_4 | $fill in the blank 2d45aa02403efd2_5 | |
Number of bills of lading | fill in the blank 2d45aa02403efd2_6 | fill in the blank 2d45aa02403efd2_7 | |
Transportation expense | $fill in the blank 2d45aa02403efd2_8 | $fill in the blank 2d45aa02403efd2_9 | $fill in the blank 2d45aa02403efd2_10 |
Accounts receivable collection rate | $fill in the blank 2d45aa02403efd2_11 | $fill in the blank 2d45aa02403efd2_12 | |
Number of sales invoices | fill in the blank 2d45aa02403efd2_13 | fill in the blank 2d45aa02403efd2_14 | |
Accounts receivable collection expense | $fill in the blank 2d45aa02403efd2_15 | $fill in the blank 2d45aa02403efd2_16 | $fill in the blank 2d45aa02403efd2_17 |
Warehouse rate per sq. ft. | $fill in the blank 2d45aa02403efd2_18 | $fill in the blank 2d45aa02403efd2_19 | |
Number of square feet | fill in the blank 2d45aa02403efd2_20 | fill in the blank 2d45aa02403efd2_21 | |
Warehouse expense | $fill in the blank 2d45aa02403efd2_22 | $fill in the blank 2d45aa02403efd2_23 | $fill in the blank 2d45aa02403efd2_24 |
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