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 operating income for the two divisions accurately measure performance?

b. Using service charge rates for service department charges, correct the divisional income statements.

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PANDA AIRLINES INC. Divisional Income Statements For the Year Ended April 30, 20Y9 Passenger DIvision Cargo Dlvislon $7,500,000 (4,500,000) $5,000,000 (2.700,000) Operating expenses Operating income before service department charges 3,000,000 $2,300,000 Less service department charges: Training Flight scheduling Reservations 300,000 210,000 153,000(663,000) $200,000 140,000 02,000(442,000) Operating income $2,337,000 $1,858,000 Passenger Division Cargo Division Total Number of personnel trained Number of flig ts Number of reservations requested 600 200 800 5,000 750,000 1,000 750,000 03