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    A.G. Bell Communications Company Income Statement

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    A.G. Bell Communications Company 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, 2006.

    Revenues-Central Division $620,000
    Revenues-Coastal Division $856,000
    Revenues-Metro Division $1,180,000
    Operating Expenses-Central Division $370,000
    Operating Expenses-Coastal Division $495,700
    Operating Expenses-Metro Division $675,200
    Corporate Expenses-Shareholder Relations $65,000
    Corporate Expenses-Customer Support $192,000
    Corporate Expenses-Central Accounting $102,000
    General Corporate Officers' Salaries $190,000

    The company operates three service departments: Shareholder Relations, Customer Support, and Central Accounting.
    The Shareholder Relations Department conducts a variety of services for shareholders of the company.
    The Customer Support Department is the company's telephone point of contact for new service, complaints and requests for repair.
    The department believes that the number of customer calls is an active base for this work. The Central Accounting Department provides reports
    for division management. The department believes that the number of reports is an active base for this work. The following additional information
    has been gathered:

    Central Coastal Metro
    Number of customer calls 4,000 4,600 7,400
    Number of accounting reports 800 1,400 1,200

    Instructions
    1. Prepare quarterly income statements showing income from operations for the three divisions.
    Use three column headings: Central, Coastal, and Metro.
    2. Identify the most successful division according to the profit margin. Round whole percentages to two decimal places.
    3. 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.

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    Solution Preview

    A.G. Bell Communications Company 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, 2006.

    Revenues-Central Division $620,000
    Revenues-Coastal Division $856,000
    Revenues-Metro Division $1,180,000
    Operating Expenses-Central Division $370,000
    Operating Expenses-Coastal Division $495,700
    Operating Expenses-Metro Division $675,200
    Corporate Expenses-Shareholder Relations $65,000
    Corporate Expenses-Customer Support $192,000
    Corporate Expenses-Central Accounting $102,000
    General Corporate Officers' Salaries $190,000

    The company operates three service departments: Shareholder Relations, ...

    Solution Summary

    This solution is comprised of a detailed preparation of income statement for A.G. Bell Communications Company in excel file.

    $2.19