r 12 homes within the Data on revenue and e nursing. Meals On Wheels, and for th

Question

r 12 homes within the Data on revenue and e nursing. Meals On Wheels, and for the past year follow 42,080 15,ee0 The head administrator of Jackson County Senlor Judith Miyama, considers last years net operating income of $5,000 to be s considering the possibility of discontinuing the The depreciation in housekeeping is for a small van that is used to carry the program were s and their equipment from job to job. If the the van would be donated to a charitable organization. None of the general administrative overhead if the h program were dropped, but the liability insurance and the salary of the program administrator ) of discontinuing the Housekeeping program? in r nt Req 1A. should the Housekeeping program be di 2-a. Prepare a properly formatted income statement Prey 1 of 2 Next>

Explanation / Answer

1-a. Financial (disadvantage): ($28000)

Note: Depreciation on the van is a sunk cost and remaining cost of vans will be written off when the vans are donated.

1-b. NO.

The Housekeeping program should not be discontinued since it would result in a financial disadvantage of $28000.

2-a.

2-b. Yes.

Current Total Total if Difference: Financial Housekeeping is dropped Advantage (Disadvantage) Revenues 900000 660000 -240000 Variable expenses 490000 330000 160000 Contribution margin 410000 330000 -80000 Fixed expenses: Depreciation 68000 68000 0 Liability insurance 42000 27000 15000 Program administrators' salaries 115000 78000 37000 General administrative overhead 180000 180000 0 Total fixed expenses 405000 353000 52000 Net operating income (loss) 5000 -23000 -28000

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