Jackson County Senior Services is a nonprofit organization devoted to providing
ID: 2536944 • 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: Meals On House- keeping $925, 000 263,000 $ 408,000 $ 254,000 155,000 99,000 Home Total Nursing Wheels Revenues Variable expenses Contribution margin Fixed expenses: 475,000 112,000 208,000 450,000 151,000 200,000 Depreciation Liability insurance Program administrators' salaries General administrative overhead* 20,900 15,700 35,700 50,800 123,100 $ 37,000 $ 29,500 $ 31,600 $ (24,100) 69,900 43,400 114,700 185, 000 40,500 7,400 38,900 81,600 413,000 121,500 168,400 8,500 20,300 40,100 52,600 Total fixed expenses Net operating income (loss) Allocated on the basis of program revenues The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $37,000 to be unsatisfactory; therefore, she is considering the possibility of discontinuing the housekeeping progranm 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 Required: 1-a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? 1-b. Should the Housekeeping program be discontinued? 2-a. Prepare a properly formatted segmented income statement. 2-b. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services?Explanation / Answer
Solution 1:
Solution 2:
No, The Housekeeping Program should not be discontinued since there is a financial disadvantage of $47,600 on discontinuation of Housekeeping Program.
Solution 3:
Solution 4:
Yes, a segmented Income Statement would be more useful to management as it helps in analizing each unit separately and its profitability.
Computation of financial advantage (disadvantage) of discontinuing Housekeeping Particulars Continue Housekeeping Discontinue Housekeeping Financial Advantage (Disadvantage) of discontinuing Housekeeping Revenue $254,000.00 $0.00 -$254,000.00 Costs: Varaible Expenses $155,000.00 $0.00 -$155,000.00 Fixed Expenses: Depreciation (Sunk Cost) $0.00 $0.00 $0.00 liability insurance $15,700.00 $0.00 -$15,700.00 Program administrators' salaries $35,700.00 $0.00 -$35,700.00 General Administrative Overhead $50,800.00 $50,800.00 $0.00 Total Expenses $257,200.00 $50,800.00 -$206,400.00 Income / (Loss) -$3,200.00 -$50,800.00 -$47,600.00Related Questions
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