seniors on a regular oasis to check on their general health and to perform tests
ID: 2476608 • Letter: S
Question
seniors on a regular oasis to check on their general health and to perform tests ordered by their physicians. The Meals On Wheels program delivers a hot meal once a day to each senior enrolled in the program. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for the past year follow: Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organization's finances and considers the net operating income of $61,400 last year to be too small. (Last year's results were very similar to the results for previous years and are representative of what would be expected in the future.) She feels that the organization should be building its financial reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ms. Miyama asked for more information about the financial advisability of discontinuing the housekeeping program. The depreciation in housekeeping is for a small van that is used to carry the housekeepers and their equipment from job to job. If the program were discontinued, the van would be donated to a charitable organization. Depreciation charges assume zero salvage value. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided. What is the impact on net operating income by discontinuing housekeeping program? (Input the amount as a positive value. Omit the "$" sign in your response.)Explanation / Answer
If housekeeping program is discontinued everything will be eliminated except General overhead of 51600 which will be allocated to remaining two programs which will reduce operating profit
Depreciation will discontinue as van will be donated, but loss on book value will be a one time hit if any.
hence there will be :
Decrease in net operating income by $ 51600
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