BOOK Calculator brrections to Support Department Allocations for a Service Company ocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were repared: Rocky Mountain Airlines Inc. Divisional Income Statements For the Year Ended December 31, 2049 Passenger Cargo Division Division Revenues $4,200,000 $4,200,000 Operating expenses (2,700,000) (3,500,000) Operating income before support department allocations $1,500,000 $700,000 Support department allocations: Training $(180,000) $(180,000) Flight scheduling (275,000) (275,000) Reservations (375,000) (375,000) Total support department allocations $(830,000) $(830,000) Operating income (los) $670,000 $(130,000) 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: Passenger Division Cargo Division Total Check My Work Previous Next > Al work saved Email Instructor Save and it Suomi Asment for Grading eBook Calculator Total Passenger Division 600 Number of personnel trained Number of flights Number of reservations requested Cargo Division 200 1,500 0 1,000 30,000 800 2,500 30,000 a. Does the operating income (loss) for the two divisions accurately measure performance? Explain. The reported operating income does not accurately measure performance because the support department charges are based on revenues are not associated with the profit center manager's use of the support department services. Revenues Feedback Check My Work a. Responsibility accounting for profit centers focuses on reporting revenues, expenses and operating income. Thus, responsibility accounting reports for profit centers take the form of income statements. Consider whether the costs are correctly allocated to the Cargo Division. b. Correct the divisional income statements, using the activity bases provided in revising the service department charges. If an amount box does not require an entry, leave it blank, or enter "O". Round your interim calculations to two decimal places, If required. Rocky Mountain Airlines Inc. Divisional Income Statements For the Year Ended December 31, 2019 Passenger Division Cargo Division Revenues Operating expenses Previous Next > Check My Work Save and Exit Submit Assignment for Grading Emainstructor Calculator b. Correct the divisional income statements, using the activity bases provided in revising the service department charges. If an amount leave it blank, or enter "0". Round your interim calculations to two decimal places, if required. Rocky Mountain Airlines Inc. Divisional Income Statements For the Year Ended December 31, 2019 Passenger Division Cargo Division Revenues Operating expenses Operating income before support department allocations Support department allocations: Training Flight scheduling Reservations Total support department allocations Operating income Feedback Check My Work b. Consider the relationship of the departments. Look at how revenues are associated with the profit center Feedback Check My Work