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 $2,114,000 $2,114,000 Operating expenses (1,711,280) (1,884,000) Operating income before service department charges $402,720 $230,000 Less service department charges: Training $94,500 $94,500 Flight scheduling 89,010 89,010 Reservations 94,800 (278,310) 94,800 (278,310) Operating income (loss) $124,410 $(48,310) 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 300 120 420 Number of flights 360 500 860 Number of reservations requested 15,800 0 15,800 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".

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter24: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 8E: Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division...

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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		$2,114,000		$2,114,000
Operating expenses		(1,711,280)		(1,884,000)
Operating income before service department charges		$402,720		$230,000
Less service department charges:
Training	$94,500		$94,500
Flight scheduling	89,010		89,010
Reservations	94,800	(278,310)	94,800	(278,310)
Operating income (loss)		$124,410		$(48,310)

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	300		120	420
Number of flights	360		500	860
Number of reservations requested	15,800		0	15,800

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".

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