Jackson County Senior Services is a nonprofit organization devoted to providing
ID: 2480404 • 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 $23,800 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.) Therefore, she has asked for more information about the financial advisability of discontinuing the housekeeping program.
The depreciation in housekeeping is for a van that transports 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.)
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
net operating income after discontinuing house keeping service is 20500+50800 i.e loss of $ 71300
even after not considering deppreciation i.e sunk cost which is not relevant for calculating income the actual loss is $ 50800 which is more than current loss
Impact of not continuing house keeping business is = 20700+31700-71300 =(18900)
No the house keeping programme should not be discontinued as loss arising after discontinuation is more than previous profit.
Yes, a segment income statement format will be more useful to management in assessing the long run viability of the various service as this seperate statement will give the true statement of each service i.e which service is earning profit and which one is incurring loss.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.