Jackson County Senior Services is a nonprofit organization devoted to providing
ID: 2461321 • 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 $5,000 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?
Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services.
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
1 (a). Impact of Net operating income by discountinuing housekeeping program $ Total Net operating Income inclusive of Housekeeping 5,000 Add:- Saving in Discontinuing the house keeping operation 40,000 Less:- Allocation of Administration exp to housekeeping operation -48,000 operating loss after discountinuing the housekeeping operation -3,000 Impact on Net Operating Income decrease by after discountinuing the housekeeping operation 8,000 ($ 5000+ $3000), alternatively also ( $48000- $40000) 1 (b) Should housekeeping program discountinue house keeping progmme should not be discountinued as it results in decrease in net operating income by $ 8000. and the business will comes in the loss of $ 3000.
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