Business, 13.03.2020 05:49 eskarletche8

Corrections to Service Department Charges for a Service Company Wild Sun Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared:

Wild Sun Airlines Inc.
Divisional Income Statements
For the Year Ended December 31, 20Y9
Passenger Division Cargo Division
Revenues $3,025,000 $3,025,000
Operating expenses 2,450,000 2,736,000
Income from operations before service department charges $575,000 $289,000
Less service department charges:
Training $125,000 $125,000
Flight scheduling 108,000 108,000
Reservations 151,200 384,200
Income from operations $190,800 $(95,200)

The service department charge rate for the service department costs was based on revenues. Because the revenues of the two divisions were the same, the service department charges to each division were also the same. The following additional information is available:

Passenger Division Cargo Division Total
Number of personnel trained 350 150 500
Number of flights 800 1,200 2,000
Number of reservations requested 20,000 0 20,000

Does the income from operations for the two divisions accurately measure performance

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Corrections to Service Department Charges for a Service Company Wild Sun Airlines Inc. has two divis...

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