Wild Sun Airlines Inc. Divisional Income Statements For the Year Ended December 31, 20Y9 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 department 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. The reported income from operations accurately measure performance because the service department charges are based on . Revenues associated with the profit center manager’s use of the service department services. 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 "0". Round your interim calculations to two decimal places, if required. WILD SUN AIRLINES INC. Divisional Income Statements For the Year Ended December 31, 20Y9 Passenger Division Cargo Division $fill in the blank 2397fcfb3010fdd_2 $fill in the blank 2397fcfb3010fdd_3 fill in the blank 2397fcfb3010fdd_5 fill in the blank 2397fcfb3010fdd_6 Income from operations before service department charges $fill in the blank 2397fcfb3010fdd_7 $fill in the blank 2397fcfb3010fdd_8 Less service department charges: $fill in the blank 2397fcfb3010fdd_10 $fill in the blank 2397fcfb3010fdd_11 fill in the blank 2397fcfb3010fdd_13 fill in the blank 2397fcfb3010fdd_14 fill in the blank 2397fcfb3010fdd_16 fill in the blank 2397fcfb3010fdd_17 fill in the blank 2397fcfb3010fdd_18 fill in the blank 2397fcfb3010fdd_19 $fill in the blank 2397fcfb3010fdd_21 $fill in the blank 2397fcfb3010fdd_

Wild Sun Airlines Inc. Divisional Income Statements For the Year Ended December 31, 20Y9 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 department 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. The reported income from operations accurately measure performance because the service department charges are based on . Revenues associated with the profit center manager’s use of the service department services. 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 "0". Round your interim calculations to two decimal places, if required. WILD SUN AIRLINES INC. Divisional Income Statements For the Year Ended December 31, 20Y9 Passenger Division Cargo Division $fill in the blank 2397fcfb3010fdd_2 $fill in the blank 2397fcfb3010fdd_3 fill in the blank 2397fcfb3010fdd_5 fill in the blank 2397fcfb3010fdd_6 Income from operations before service department charges $fill in the blank 2397fcfb3010fdd_7 $fill in the blank 2397fcfb3010fdd_8 Less service department charges: $fill in the blank 2397fcfb3010fdd_10 $fill in the blank 2397fcfb3010fdd_11 fill in the blank 2397fcfb3010fdd_13 fill in the blank 2397fcfb3010fdd_14 fill in the blank 2397fcfb3010fdd_16 fill in the blank 2397fcfb3010fdd_17 fill in the blank 2397fcfb3010fdd_18 fill in the blank 2397fcfb3010fdd_19 $fill in the blank 2397fcfb3010fdd_21 $fill in the blank 2397fcfb3010fdd_

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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Question

Corrections to Service Department Charges for a Service Company

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:

Wild Sun Airlines Inc. Divisional Income Statements For the Year Ended December 31, 20Y9
	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 department 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.

The reported income from operations accurately measure performance because the service department charges are based on . Revenues associated with the profit center manager’s use of the service department services.

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 "0". Round your interim calculations to two decimal places, if required.

WILD SUN AIRLINES INC.
Divisional Income Statements
For the Year Ended December 31, 20Y9
		Passenger Division		Cargo Division
		$fill in the blank 2397fcfb3010fdd_2		$fill in the blank 2397fcfb3010fdd_3
		fill in the blank 2397fcfb3010fdd_5		fill in the blank 2397fcfb3010fdd_6
Income from operations before service department charges		$fill in the blank 2397fcfb3010fdd_7		$fill in the blank 2397fcfb3010fdd_8
Less service department charges:
	$fill in the blank 2397fcfb3010fdd_10		$fill in the blank 2397fcfb3010fdd_11
	fill in the blank 2397fcfb3010fdd_13		fill in the blank 2397fcfb3010fdd_14
	fill in the blank 2397fcfb3010fdd_16	fill in the blank 2397fcfb3010fdd_17	fill in the blank 2397fcfb3010fdd_18	fill in the blank 2397fcfb3010fdd_19
		$fill in the blank 2397fcfb3010fdd_21		$fill in the blank 2397fcfb3010fdd_22

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