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.

Wild Sun Airlines Inc. Divisional Income Statements For the Year Ended December 31, 2014 Passenger Division Cargo Division $3,025,000 2,450,000 $3,025,000 2,736,000 Operating expenses Income from operations before 289,000 ervice department charges Training Flight scheduling 575,000 Less service department charges: $125,000 108,000 125,000 108,000 Reservations 151200 384 200 151,200 384200 $ (95,200 Income from operations 190,800 Passenger Cargo Division 150 Division 350 800 20,000 Total Number of personnel trained Number of flights Number of reservations requested 500 2,000 20,000 1,200 0