Posted: December 28th, 2020

Problem 23-2 (Algorithmic) Profit Center Responsibility Reporting

Problem 23-2 (Algorithmic)Profit Center Responsibility ReportingJohnson Products Inc. has three regional divisions organized 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, 2012:Revenues-East$ 1,085,200Revenues-West1,259,700Revenues-Central2,337,500Operating Expenses-East687,700Operating Expenses-West749,700Operating Expenses-Central1,413,600Corporate Expenses-Shareholder Relations165,000Corporate Expenses-Customer Support621,600Corporate Expenses-Legal180,000General Corporate Officer's Salaries364,500The 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:EastWestCentralNumber of customer contacts5,6006,7009,900Number of hours billed9001,4001,300Required:Hide· Hint(s)a.Prepare quarterly income statements showing income from operations for the three divisions. Use three column headings: East, West, and Central.Johnson Products Inc.Divisional Income StatementsFor the Quarter Ended December 31, 2012EastWestCentralRevenues$Correct 8 of Item 1$Correct 9 of Item 1$Correct 10 of Item 1Operating expensesCorrect 12 of Item 1Correct 13 of Item 1Correct 14 of Item 1Income from operations before service department charges$Correct 16 of Item 1$Correct 17 of Item 1$Correct 18 of Item 1Less service department charges:Customer support$Correct 21 of Item 1$Correct 22 of Item 1$Correct 23 of Item 1LegalCorrect 25 of Item 1Correct 26 of Item 1Correct 27 of Item 1Subtotal$Correct 29 of Item 1$Correct 30 of Item 1$Correct 31 of Item 1Income from operations$Correct 33 of Item 1$Correct 34 of Item 1$Correct 35 of Item 1Hide FeedbackShow All FeedbackPartially CorrectCheck My Work Feedbacka. Determine the customer contact rate by dividing service cost by output. For each division's customer support, multiply the customer contact rate by the number of customer contacts. Repeat this process for the other service department charges. Subtract the service department charges for a division from that division's income from operations before such charges.Post Submission FeedbackSolution· b.What is the profit margin percentage of each division? Round to one decimal place.DivisionProfit MarginEast Division%West Division%Central Division%Identify the most successful division according to the profit margin percentage.Select East West Central Correct 4 of Item 2c.Provide a recommendation to the CEO for a better method for evaluating the performance of the divisions. In your recommendation, identify the major weakness of the present method.The input in the box below will not be graded, but may be reviewed and considered by your instructor.blankCorrect 5 of Item 2Hide FeedbackShow All FeedbackPartially CorrectCheck My Work Feedbackb. Income from operations divided by revenues equals profit margin.c. What other performance measure(s) could be used?Post Submission FeedbackSolution

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