Worldwide Air, 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?
b. Correct the divisional income statements, using the activity bases provided above in revising the service departmentcharges.

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Worldwide Air, Inc. Divisional Income Statements For the Year Ended July 31, 2008 Passenger Division $600,000 300,000 Cargo Division $600,000 250,000 Operating expenses Income from operations before $300,000 $350,000 Less service department charges: $50,000 60,000 80,000 Training. $50,000 Trip scheduling. Reservations. 60,000 80,000 190,000 190,000 $110,000 Income from operations $160,000 Passenger Division Cargo Division Total Number of personnel trained Number of trips Number of reservations requested 40 30 4,000 10 50 50 80 4,000