Corrections to Support Department Allocations for a Service Company Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared: Rocky Mountain Airlines Inc. Divisional Income Statements For the Year Ended December 31, 2019 Passenger Cargo Division Division Revenues $4,200,000 $4,200,000 Operating expenses (2,700,000) (3.500,000) Operating income before support department allocations $1,500,000 $700,000 Support department allocations: Training $(180,000) $(180,000) Flight scheduling (275,000) (275,000) Reservations (375,000) (375,000) Total support department allocations S[830,000) $(830,000) Operating income (loss) $670,000 $(130,000) The support department allocation rates for the support department costs were based on revenues. Because the revenues of the two divisions were the same, the support department allocations to each division were also the same. The following additional information is available: Total Number of personnel trained Number of lights Passenger Division 600 1,000 30,000 Cargo Division 200 1,500 0 800 2,500 30,000 Number of reservations requested a. Does the operating income (loss) for the two divisions accurately measure performance? Explain The reported operating income accurately measure performance because the support department charges are based on Revenues associated with the profit center manager's use of the support department services. Fundack Check My Work a. Responsibility accounting for profit centers focuses on reporting revenues, expenses and operating income. Thus, responsibility accounting reports for profit centers take the form of income statements. Consider whether the costs are correctly allocated to the Cargo Division. 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 "O". Round your interim calculations to two decimal places, if required. Rocky Mountain Airlines Inc. Divisional Income Statements For the Year Ended December 31, 2049 Passenger Division Cargo Division S4200.000 4200,000 Revenues Operating expenses -2.700.000 -3.500.000 S 1.500.000 Operating income before support department allocations Support department allocations: Training Flight scheduling Reservations Total support department allocations Operating income Handbuch