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html Ch. 12 Homework 2 Problem 12-19 Dropping or Retaining a Segment [Lo12-2) Ja

ID: 2579629 • Letter: H

Question

html Ch. 12 Homework 2 Problem 12-19 Dropping or Retaining a Segment [Lo12-2) 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 20 als OnHouse To tal Nursing Wheels keeping $925,000 $ 263,000$ 489,000% 253,000 194,000 155,000 98,000 Variable expenses Contribution margin Fixed expenses: 464,000 115,000 461,000 69,300 43,100 114,600 185,000 8,200 Depreciation Liability insurance Program administrators' salaries General administrative overhead* 7,800 15,100 38,900 35,100 81,800 50,600 168,900 121,500 49,000 26,400 46,100 $(23,500) 20,200 48,680 52,600 Total fixed expenses Net operating income (loss) Allocated on the basis of program revenues 0 .,e@ Type here to search

Explanation / Answer

Answer:

1

The financial advantage and disadvantage of discontinuing House Keeping program

for calculating advantage and disadvantage of discontinuing House Keeping program we need to prepare the comparative table with House keeping and shout House keeping program

With HK

W/O HK

Revenues

   253,000

0

Variable Expenses

   155,000

0

Contribution Margin

      98,000

0

Fixed Expenses:

   Depreciation

      20,700

20700

   Liability Insurance

      15,100

0

   Program administrators' salaries

      35,100

0

   General Admin OH*

      50,600

      50,600

Total fixed expenses

   121,500

      71,300

Net operating income (loss)

   (23,500)

   (71,300)

Increase in Net operating income (loss)

=71300-23500

=47800

_____________________________________________________________________-

2

Answer: NO

House Keeping program should not be discontinued as there is increase in loss by $47800. So it should be continued

______________________________________________

3

Segmented Income statement

Total

Home Nursing

Meals on Wheels

House-keeping

Revenues

       925,000

     263,000

   409,000

   253,000

Variable Expenses

       464,000

     115,000

   194,000

   155,000

Contribution Margin

       461,000

     148,000

   215,000

      98,000

Fixed Expenses:

   Depreciation

          69,300

           8,200

      40,400

      20,700

   Liability Insurance

          43,100

        20,200

         7,800

      15,100

   Program administrators' salaries

       114,600

        40,600

      38,900

      35,100

Total Tractable Fixed Expanses

       227,000

        69,000

      87,100

      70,900

Program segment margin

       234,000

        79,000

   127,900

      27,100

less:

   General Admin OH*

       185,000

Net operating income (loss)

          49,000

_________________________________________________

4

Yes, Segmented Income statement is more useful to management

With HK

W/O HK

Revenues

   253,000

0

Variable Expenses

   155,000

0

Contribution Margin

      98,000

0

Fixed Expenses:

   Depreciation

      20,700

20700

   Liability Insurance

      15,100

0

   Program administrators' salaries

      35,100

0

   General Admin OH*

      50,600

      50,600

Total fixed expenses

   121,500

      71,300

Net operating income (loss)

   (23,500)

   (71,300)