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:

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 Cargo
Division 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.

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Wild Sun Airlines In Divisional Income Statements For the Year Ended December 31, 20Y9 Passenger Division Cargo Division Revenues Operating expenses Income from operations before $3,025,000 2,450,000 $3,025,000 2,736,000 service department charges 575,000 $ 289,000 Less service department charges: Training Flight scheduling Reservations 125,000 108,000 151,200 125,000 108,000 151.200 384,200 190,800 384,200 $ (95,200) Income from operations