Bi-Coastal Railroad Company organizes its three divisions, the Northwest, Western, and Northern 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, 2007:
Revenues€”NW Region ............ $1,450,000
Revenues€”W Region ............. 2,350,000
Revenues€”N Region .............. 1,950,000
Operating Expenses€”NW Region ......... 950,000
Operating Expenses€”W Region .......... 1,750,000
Operating Expenses€”N Region .......... 1,430,000
Corporate Expenses€”Dispatching ......... 500,000
Corporate Expenses€”Equipment ......... 525,000
Corporate Expenses€”Treasurer .......... 350,000
General Corporate Officers€™ Salaries ......... 650,000
The company operates three service departments: the Dispatching Department, the Equipment Department, and the Treasurer€™s Department. The Dispatching Department manages the scheduling and releasing of complete trains. The Equipment Department manages the railroad car 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:

Instructions
1. Prepare quarterly income statements showing income from operations for the three divisions. Use three column headings: Northwest, Western, and Northern.
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 presentmethod.

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Northwest Western Northern Number of scheduled trains Number of railroad cars in inventory 500 6,000 850 8,000 650 7,000