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 1 year ago

Next > < Previous

Related Solutions

Profit Center Responsibility Reporting A-One Freight Inc. has three regional divisions organized as profit centers. The...

Profit Center Responsibility Reporting A-One Freight Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31, 20Y3. Revenues—Air Division $ 1,290,700 Revenues—Rail Division 1,562,500 Revenues—Truck Division 2,729,100 Operating Expenses—Air Division 817,900 Operating Expenses—Rail Division 929,900 Operating Expenses—Truck Division 1,650,400 Corporate Expenses—Shareholder Relations 196,300 Corporate Expenses—Customer Support 665,000 Corporate...

Profit Center Responsibility Reporting A-One Freight Inc. has three regional divisions organized as profit centers. The...

Profit Center Responsibility Reporting A-One Freight Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31, 20Y3. Revenues—Air Division $ 1,104,600 Revenues—Rail Division 1,295,000 Revenues—Truck Division 2,401,200 Operating Expenses—Air Division 700,000 Operating Expenses—Rail Division 770,700 Operating Expenses—Truck Division 1,452,100 Corporate Expenses—Shareholder Relations 168,000 Corporate Expenses—Customer Support 613,800 Corporate...

34. Altoona Corporation has two divisions, Hinges and Doors, which are both organized as profit centers;...

34. Altoona Corporation has two divisions, Hinges and Doors, which are both organized as profit centers; the Hinge Division produces and sells hinges to the Door Division and to outside customers. The Hinge Division has total costs of $31, $20 of which are variable. The Hinge Division is operating significantly below capacity and sells the hinges for $46. The Door Division has received an offer from an outsider vendor to supply all the hinges it needs (26,000 hinges) at a...

Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer...

Red Line Railroad Inc. has three regional divisions organized 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: Revenues—East $ 862,000 Revenues—West 1,036,000 Revenues—Central 1,890,000 Operating Expenses—East 563,600 Operating Expenses—West 621,840 Operating Expenses—Central 1,167,900 Corporate Expenses—Shareholder Relations 150,000 Corporate Expenses—Customer Support 360,000 Corporate Expenses—Legal 252,000 General Corporate Officers’ Salaries 274,500 The company...

Traxonia Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO)...

Traxonia Railroad Inc. has three regional divisions organized 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, 2016: Revenues—East $ 866,000 Revenues—West 1,030,000 Revenues—Central 1,890,000 Operating Expenses—East 565,700 Operating Expenses—West 627,360 Operating Expenses—Central 1,170,060 Corporate Expenses—Shareholder Relations 156,000 Corporate Expenses—Customer Support 320,000 Corporate Expenses—Legal 255,200 General Corporate Officers’ Salaries 273,500 The company...

Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer...

Red Line Railroad Inc. has three regional divisions organized 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: Revenues—East $878,000 Revenues—West 1,042,000 Revenues—Central 1,880,000 Operating Expenses—East 563,600 Operating Expenses—West 619,680 Operating Expenses—Central 1,172,940 Corporate Expenses—Shareholder Relations 155,000 Corporate Expenses—Customer Support 333,000 Corporate Expenses—Legal 233,100 General Corporate Officers’ Salaries 278,500 The company operates...

Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer...

Red Line Railroad Inc. has three regional divisions organized 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: Revenues—East $ 878,000 Revenues—West 1,042,000 Revenues—Central 1,880,000 Operating Expenses—East 563,600 Operating Expenses—West 619,680 Operating Expenses—Central 1,172,940 Corporate Expenses—Shareholder Relations 155,000 Corporate Expenses—Customer Support 333,000 Corporate Expenses—Legal 233,100 General Corporate Officers’ Salaries 278,500 The company...

Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer...

Red Line Railroad Inc. has three regional divisions organized 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: Revenues—East $ 870,000 Revenues—West 1,034,000 Revenues—Central 1,880,000 Operating Expenses—East 565,700 Operating Expenses—West 621,360 Operating Expenses—Central 1,174,660 Corporate Expenses—Shareholder Relations 150,000 Corporate Expenses—Customer Support 350,000 Corporate Expenses—Legal 264,000 General Corporate Officers’ Salaries 281,000 The company...

Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer...

Red Line Railroad Inc. has three regional divisions organized 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: Revenues—East $884,000 Revenues—West 1,050,000 Revenues—Central 1,870,000 Operating Expenses—East 568,100 Operating Expenses—West 623,520 Operating Expenses—Central 1,170,540 Corporate Expenses—Shareholder Relations 157,000 Corporate Expenses—Customer Support 407,000 Corporate Expenses—Legal 261,000 General Corporate Officers’ Salaries 270,750 The company operates...

Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer...

Red Line Railroad Inc. has three regional divisions organized 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: Revenues—East $ 890,000 Revenues—West 1,046,000 Revenues—Central 1,880,000 Operating Expenses—East 563,900 Operating Expenses—West 625,920 Operating Expenses—Central 1,167,540 Corporate Expenses—Shareholder Relations 159,000 Corporate Expenses—Customer Support 314,500 Corporate Expenses—Legal 271,200 General Corporate Officers’ Salaries 277,750 The company...

Subjects