Question

In: Accounting

Wild Sun Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the...

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

1

Passenger Division

Cargo Division

2

Revenues

$3,065,000.00

$3,065,000.00

3

Operating expenses

2,425,000.00

2,754,000.00

4

Income from operations before service department charges

$640,000.00

$311,000.00

5

Less service department charges:

6

Training

$135,150.00

$135,150.00

7

Flight scheduling

97,200.00

97,200.00

8

Reservations

151,400.00

151,400.00

9

Total service department charges

$383,750.00

$383,750.00

10

Income from operations

$256,250.00

$(72,750.00)

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 310 200 510
Number of flights 800 1,000 1,800
Number of reservations requested 22,000 0 22,000
Required:
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". Do not round interim calculations.

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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