Question

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:


The service department charge rate for the service department costs was based on revenues. Since 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:


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 above in revising the service departmentcharges.


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  • CreatedJune 27, 2014
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