Question: Panda Airlines Inc. has two divisions organized
Panda Airlines Inc. has two divisions organized as proï¬t 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.
The following additional information is available:
a. Does the operating income for the two divisions accurately measure performance?
b. Using service charge rates for service department charges, correct the divisional income statements.
Transcribed Image Text:
PANDA AIRLINES INC. Divisional Income Statements For the Year Ended April 30, 20Y9 Passenger Division Cargo Division Revenues $7,500,000 $5,000,000 Operating expenses Operating income before service department charges Less service department charges: Training (4,500,000) (2,700,000) $3,000,000 $2,300,000 $300,000 $200,000 Flight scheduling 210,000 140,000 Reservations 153,000 102,000 (663,000) $2,337,000 (442,000) $1,858,000 Operating income Passenger Division Cargo Division Total Number of personnel trained Number of flig ts Number of reservations requested 600 200 800 4,000 750,000 1,000 5,000 750,000
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