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

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:
Wild Sun Airlines Inc. has two divisions organized as profit

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
Division Division Total
Number of personnel trained................350.....................150.....................500
Number of flights..............................800...................1,200..................2,000
Number of reservations requested......20,000.........................0................20,000
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.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Financial And Managerial Accounting

ISBN: 9781337119207

14th Edition

Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac

Question Posted: