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Problem 23-2 (Algorithmic)_Profit Center Responsibility Reporting_Johnson Products Inc.




Profit Center Responsibility Reporting;Johnson 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;$ 1,085,200;Revenues-West;1,259,700;Revenues-Central;2,337,500;Operating Expenses-East;687,700;Operating Expenses-West;749,700;Operating Expenses-Central;1,413,600;Corporate Expenses-Shareholder Relations;165,000;Corporate Expenses-Customer Support;621,600;Corporate Expenses-Legal;180,000;General Corporate Officer's Salaries;364,500;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;East;West;Central;Number of customer contacts;5,600;6,700;9,900;Number of hours billed;900;1,400;1,300;Required;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 Statements;For the Quarter Ended December 31, 2012;East;West;Central;Revenues;$;Correct 8 of Item 1;$;Correct 9 of Item 1;$;Correct 10 of Item 1;Operating expenses;Correct 12 of Item 1;Correct 13 of Item 1;Correct 14 of Item 1;Income from operations before service department charges;$;Correct 16 of Item 1;$;Correct 17 of Item 1;$;Correct 18 of Item 1;Less service department charges;Customer support;$;Correct 21 of Item 1;$;Correct 22 of Item 1;$;Correct 23 of Item 1;Legal;Correct 25 of Item 1;Correct 26 of Item 1;Correct 27 of Item 1;Subtotal;$;Correct 29 of Item 1;$;Correct 30 of Item 1;$;Correct 31 of Item 1;Income from operations;$;Correct 33 of Item 1;$;Correct 34 of Item 1;$;Correct 35 of Item 1;a. 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.;? b. What is the profit margin percentage of each division? Round to one decimal place.;Division;Profit Margin;East Division;%;West Division;%;Central Division;%;Identify the most successful division according to the profit margin percentage.;Select East West Central Correct 4 of Item 2;c. 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.;blank;b. Income from operations divided by revenues equals profit margin.;c. What other performance measure(s) could be used?


Paper#80907 | Written in 18-Jul-2015

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