Pacific airlines has three service departments ticketing

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Reference no: EM13600024

Pacific Airlines has three service departments; ticketing, baggage handling, and aircraft maintenance. Costs of these departments are allocated to two revenue producing departments, domestic and international flights. Costs for the service departments are not separated into fixed and variable and the totals are as follows: Ticketing$4,000,000Baggage handling$2,000,000Aircraft maintenance$6,000,000 Air miles are as follows: Domestic5,000,000International20,000,000

(a) Allocate the service department costs based on air miles.

(b) Evaluate World Airlines use of air miles as a basis for allocation. Do you think the cause-and-effect relationship is strong?

Reference no: EM13600024

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