Jackson County Senior Services is a nonprofit organization devoted to providing
ID: 2591239 • 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 $50,800 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?
Total Home Nursing Meals On Wheels House-
keeping Revenues $ 932,000 $ 265,000 $ 407,000 $ 260,000 Variable expenses 468,000 120,000 194,000 154,000 Contribution margin 464,000 145,000 213,000 106,000 Fixed expenses: Depreciation 69,300 8,600 40,600 20,100 Liability insurance 43,400 20,600 7,400 15,400 Program administrators’ salaries 114,100 40,100 38,300 35,700 General administrative overhead* 186,400 53,000 81,400 52,000 Total fixed expenses 413,200 122,300 167,700 123,200 Net operating income (loss) $ 50,800 $ 22,700 $ 45,300 $ (17,200)
Explanation / Answer
total if Difference husekeeping Current are 1-a) total dropped Sales 932,000 672000 -260,000 Variable expenses 468,000 314000 154,000 contribution margin (loss) 464,000 358000 -106,000 fixed expenses Depreciation. 69,300 69300 0 liability insuranc 43,400 28,000 15,400 program administrators salaries 114,100 78400 35,700 General administrative overhead 186,400 186,400 0 total fixed expenses 413,200 362100 51,100 Net operating income(loss) 50,800 -4100 -54,900 1-b) No 2a) Segmented Income statement home meals on Racing total nusring wheels bikes sales 932,000 265,000 407,000 260,000 variable manufacturing and selling expense 468,000 120,000 194,000 154,000 contribution margin (loss) 464,000 145,000 213,000 106,000 traceable fixed expenses advertising 69,300 8,600 40,600 20,100 depreciation on special equipment 43,400 20,600 7,400 15,400 salaries of the product line managers 114,100 40,100 38,300 35,700 total traceable fixed expenses 226,800 69,300 86,300 71,200 product line segment margin 237,200 75,700 126,700 34,800 common fixed expenses 186,400 net operating income(loss) 50,800 2b) yes
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