Jackson County Senior Services is a nonprofit organization devoted to providing
ID: 2454248 • Letter: J
Question
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Jackson County area. Three services are provided for seniors—home nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow:
The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organization’s finances and considers the net operating income of $37,800 last year to be razor-thin. (Last year's results were very similar to the results for previous years and are representative of what would be expected in the future.) She feels that the organization should be building its financial reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ms. Miyama asked for more information about the financial advisability of perhaps discontinuing the housekeeping program.
The depreciation in housekeeping is for a small van that is used to carry the housekeepers and their equipment from job to job. If the program were discontinued, the van would be donated to a charitable organization. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided.
What is the impact on net operating income by discontinuing housekeeping program?
2a. Prepare a segmented income statement.
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Jackson County area. Three services are provided for seniors—home nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow:
Explanation / Answer
(1a) The impact on net operating income by discontinuing housekeeping program:
(2a) To a segmented income statement.
Total If Difference: Net Operating Current Total Housekeeping Is Dropped Income Increase or (Decrease) Revenues $925000 $669000 $256000 Variable expenses 475000 319000 156000 Contribution margin 450000 350000 100000 Fixed expenses: Depreciation 68700 48600 20100 Liability insurance 42900 27700 15200 Program administrators’ salaries 115600 79500 36100 General administrative overhead 185000 185000 0 Total fixed expenses 412200 340800 71400 Net operating income (loss) $37800 $9200 $28600Related Questions
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