Jackson County Senior Services is a nonprofit organization devoted to providing
ID: 2526907 • 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 $56,000 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? (Decreases should be indicated by a minus sign.)
Current total Total if housekeeping is dropped. difference
Revenues
Variable expenses
Contribution margin
Fixed expenses:
Depreciation
Liability insurance
Program administrators’ salaries
General administrative overhead
Total fixed expenses
Net operating income (loss)
Revenues
Variable expenses
Contribution margin
Traceable fixed expenses:
Depreciation
Liability insurance
Program administrators’ salaries
Total traceable fixed expenses
Program segment margins
General administrative overhead
Net operating income (loss)
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
Current house income total keeping increase or Dropped (decrease) Revenues 924,000 666000 -258,000 Variable expenses 455,000 304000 151,000 Conribution margin 469,000 362000 -107,000 Fixed expenses: Depreciation 69,800 69,800 0 liability insurance 43,100 28000 15,100 program administrator's salaries 115,300 79500 35,800 General administrative overhead 184,800 184,800 0 total fixed expense 413,000 362,100 50,900 Net operating income(loss) 56,000 -100 -56,100 1-b) No 2-a) Segmented income statement home Meals on house Totals nursing wheels keeping Revenues 266,000 400,000 258,000 924,000 Variable expenses 111,000 193,000 151,000 455,000 Conribution margin 155,000 207,000 107,000 469,000 Traceable fixed expenses Depreciation 8,500 40,600 20,700 69,800 liability insurance 20,800 7,200 15,100 43,100 program administrator's salaries 40,900 38,600 35,800 115,300 total traceable fixed expenses 70,200 86,400 71,600 228,200 program segment margins 84,800 120,600 35,400 240,800 General administrative OH 184,800 net operating income(loss) 56,000 2-b) Yes
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