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Category > Accounting Posted 02 Jun 2017 My Price 5.00

Wild Sun Airlines Inc. has two divisions organized as profit centers

 

Corrections to service department charges for a service company Wild Sun Airlines Inc. has two divisions organized as profit centers, the Passenger Divi- sion and the Cargo Division. The following divisional income statements were prepared:

 

Wild Sun Airlines inc.

Divisional income Statements

For the Year ended December 31, 2016

passenger Division                            Cargo Division


 

Revenues

 

$3,025,000

 

$3,025,000

 

Operating expenses

 

  2,450,000

 

  2,736,000

 

Income from operations before service  department charges

 

 

$  575,000

 

 

$ 289,000

 

Less service department charges:

 

 

 

 

 

Training

$125,000

 

$125,000

 

 

Flight scheduling

108,000

 

108,000

 

 

Reservations

  151,200

      384,200

  151,200

     384,200

 

Income from operations

 

$  190,800

 

$   (95,200)

 

 

The service department charge rate for the service department costs was based on revenues. Because the revenues of the two divisions were the same, the service depart- ment charges to each division were also the same.

The following additional information is   available:

 


passenger Division

Cargo

Division                     total


Number of personnel trained                                           350                               150                                        500

Number of flights                                                                        800                           1,200                                     2,000

Number of reservations requested                         20,000                                       0                                 20,000

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 in revising the service department charges.

 
 

Answers

Alpha Geek
(8)
Status NEW Posted 02 Jun 2017 09:06 AM My Price 5.00

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file 1496394526-Answer.docx preview (88 words )
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