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

The support department allocation rates for the support department costs were based on revenues. Because the revenues of the two divisions were the same, the support department allocations to each division were also the same.

The following additional information is available:

a. Does the operating income (loss) for the two divisions accurately measure performance? Explain.

b. Correct the divisional income statements, using appropriate support department cost drivers.

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Rocky Mountain Airlines Inc. Divisional Income Statements For the Year Ended December 31, 20Y9 Passenger Division $ 4,200,000 (2,700,000) $ 1,500,000 Cargo Division $4,200,000 Revenues (3,500,000) Operating expenses Operating income before support department allocations Support department allocations: $ 700,000 $ (180,000) (275,000) $ (180,000) (275,000) Training Flight scheduling (375,000) (375,000) Reservations $ (830,000) $ 670,000 $ (830,000) $ (130,000) Total support department allocations Operating income (loss) Passenger Division Division Cargo Total Number of personnel trained Number of flights Number of reservations requested 600 200 800 1,000 2,500 1,500 30,000 30,000