Panda Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared:

The service department charge rate for the service department costs was based on revenues.
The following additional information is available:

a. Does the income from operations for the two divisions accurately measure performance?
b. Correct the divisional income statements, using the activity bases provided on the preceding page in revising the service departmentcharges.

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Panda Airlines Inc. Divisional Income Statements For the Year Ended April 30, 2012 Passenger Division Cargo Division Revenues Operating expenses Income from operations before $7,500,000 4,500,000 $5,000,000 2,700,000 service department charges $3,000,000 $2,300,000 Less service department charges: $200,000 140,000 102,000 Training Flight scheduling Reservations 300,000 210,000 153,000 663,000 $2,337,000 442,000 $1,858,000 Income from operations Total Number of personnel trained Number of flights Number of reservations requested Passenger Division 600 4,000 Cargo Division 200 1,000 800 5,000 750,000 750,000