orrections to Service Department Charges Panda Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared: PANDA AIRLINES INC. Divisional Income Statements For the Year Ended April 30, 20Y9 Passenger Division Cargo Division Revenues $2,363,000 $2,363,000 Operating expenses (1,912,920) (2,112,280) Operating income before service department charges $450,080 $250,720 Less service department charges: Training $105,300 $105,300 Flight scheduling 97,200 97,200 Reservations 106,400 (308,900) 106,400 (308,900) Operating income (loss) $141,180 $(58,180) 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: Passenger Division Cargo Division Total Number of personnel trained 280 110 390 Number of flights 380 520 900 Number of reservations requested 15,200 0 15,200 a. Does the operating income for the two divisions accurately measure performance? Feedback Consider the activity base considered for each service department. b. Using service charge rates for service department charges, correct the divisional income statements. If an amount box does not require an entry, leave it blank or enter "0". PANDA AIRLINES INC.Divisional Income StatementsFor the Year Ended April 30, 20Y9 Passenger Division Cargo Division $Revenues $Revenues Operating expenses Operating expenses Operating income before service department charges $fill in the blank 570328087fb4f84_7 $fill in the blank 570328087fb4f84_8 Less service department charges: $Training $Training Flight scheduling Flight scheduling Reservations Reservations Reservations Reservations $Operating income $Operating incom

orrections to Service Department Charges Panda Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared: PANDA AIRLINES INC. Divisional Income Statements For the Year Ended April 30, 20Y9 Passenger Division Cargo Division Revenues $2,363,000 $2,363,000 Operating expenses (1,912,920) (2,112,280) Operating income before service department charges $450,080 $250,720 Less service department charges: Training $105,300 $105,300 Flight scheduling 97,200 97,200 Reservations 106,400 (308,900) 106,400 (308,900) Operating income (loss) $141,180 $(58,180) 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: Passenger Division Cargo Division Total Number of personnel trained 280 110 390 Number of flights 380 520 900 Number of reservations requested 15,200 0 15,200 a. Does the operating income for the two divisions accurately measure performance? Feedback Consider the activity base considered for each service department. b. Using service charge rates for service department charges, correct the divisional income statements. If an amount box does not require an entry, leave it blank or enter "0". PANDA AIRLINES INC.Divisional Income StatementsFor the Year Ended April 30, 20Y9 Passenger Division Cargo Division $Revenues $Revenues Operating expenses Operating expenses Operating income before service department charges $fill in the blank 570328087fb4f84_7 $fill in the blank 570328087fb4f84_8 Less service department charges: $Training $Training Flight scheduling Flight scheduling Reservations Reservations Reservations Reservations $Operating income $Operating incom

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Corrections to Service Department Charges

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

PANDA AIRLINES INC. Divisional Income Statements For the Year Ended April 30, 20Y9
	Passenger Division	Cargo Division
Revenues		$2,363,000		$2,363,000
Operating expenses		(1,912,920)		(2,112,280)
Operating income before service department charges		$450,080		$250,720
Less service department charges:
Training	$105,300		$105,300
Flight scheduling	97,200		97,200
Reservations	106,400	(308,900)	106,400	(308,900)
Operating income (loss)		$141,180		$(58,180)

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:

	Passenger Division	Cargo Division	Total
Number of personnel trained	280		110	390
Number of flights	380		520	900
Number of reservations requested	15,200		0	15,200

a. Does the operating income for the two divisions accurately measure performance?

Feedback

Consider the activity base considered for each service department.

b. Using service charge rates for service department charges, correct the divisional income statements. If an amount box does not require an entry, leave it blank or enter "0".

PANDA AIRLINES INC.Divisional Income StatementsFor the Year Ended April 30, 20Y9

		Passenger Division		Cargo Division
		$Revenues		$Revenues
		Operating expenses		Operating expenses
Operating income before service department charges		$fill in the blank 570328087fb4f84_7		$fill in the blank 570328087fb4f84_8
Less service department charges:
	$Training		$Training
	Flight scheduling		Flight scheduling
	Reservations	Reservations	Reservations	Reservations
		$Operating income		$Operating income

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