Extracted text: b. Correct the divisional income statements, using the activity bases provided in revising the service department charges. If an amount box does not require an entry, leave it blank, or enter "0". Do not round your interim calculations. WILD SUN AIRLINES INC. Divisional Income Statements For the Year Ended December 31, 20Y9 Passenger Division Cargo Division Revenues 2,314,000 2,314,000 Operating expenses 1,873,300 2,082,600 Income from operations before service department charges 440,700 231400 Less service department charges: Training Flight scheduling Reservations Income from operations
Extracted text: 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 $2,314,000 $2,314,000 Operating expenses 1,873,300 2,082,600 Income from operations before $440,700 $231,400 service department charges Less service department charges: Training $108,800 $108,800 Flight scheduling 80,850 80,850 Reservations 108,000 297,650 108,000 297,650 Income from operations $143,050 $(66,250) 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 Cargo Total Division Division Number of personnel trained 240 100 340 Number of flights 320 450 770 Number of reservations requested 14,400 14,400 a. Does the income from operations for the two divisions accurately measure performance? Explain. The reported income from operations does not accurately measure performance because the service department charges are based on revenues Revenues are not associated with the profit center manager's use of the service department services. b. Correct the divisional income statements, using the activity bases provided in revising the service department charges. If an amount box does not require an entry, leave it blank, or enter "0". Do not round your interim calculations. WILD SUN AIRLINES INC. Divisional Income Statements For the Year Ended December 31, 20Y9 Passenger Division Cargo Division