Managerial Accounting: E24-8 Wild Sun Airlines Inc. has two divisions organized as profit centers

Managerial Accounting 
E24-8 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: 
Divisional Income Statements 
For the Year Ended December 31, 2016 
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 151,200 151,200 
Total service department charges 384,200 384,200 
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 - 20,000 

a. Does the income from operations for the two divisions accurately measure performance? Explain. 
b. Correct the divisional income statements, using the activity bases provided in revising the service department charges. If there is no amount or an amount is zero, enter "0". Round your interim calculations to two decimal places, if required.
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