Jackson County Senior Services is a nonprofit organization devoted to providing

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. In t seniors on a regular basis to check on their general health and to perform tests ordered by their physicians The Meals On Wheel housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for the past year follow: he ho ne nursing program, nurses visit Is program delivers a hot meal once a day to each senior enrolled in the program am. The Home Meals On House keeping $ 922,000 $ 262,000 $ 401,000 $ 259,000 477,000 12,000 207,000 158,000 Total Nursing Wheels Revenues Variable expenses Contribution margin Fixed expenses 445,000 150.000 194.000 101,000 70,000 43,900 114.500 8,600 20,800 40.800 40,800 7,700 38,600 80,200 20,600 15,400 Depreciation Liability insurance Program administrators' salaries 35,100 51,800 General administrative overhead* 184,400 52,400 Total fixed expenses 412,800 22,600 167,300 122,900 Net operating income (loss) $ 32,200 27,400 $ 26,700 $ (21,900) Allocated on the basis of program revenues The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organization's finances and considers the net operating income of $32,200 last year to be too small. (Last years 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. Miy ama asked for more information about the financial advisability of discontinuing the housekeeping program

Explanation / Answer

(1a) Current Total Total if house keeping dropped Difference: Net effect

Revenue 922000 663000(262000+401000) 259000

less: Variable cost 477000 319000(112000+207000) 158000

Contribution 445000 344000(150000 + 194000) 101000

fixed cost expense:   

Depreciation 70000 49400(8600 +40800) 20600

liability insurance 43900 28500(20800 + 7700) 15400

Program administration 114500 79400(40800 +38600) 35100

General adminstrative overhead 184400 184400 -

Total fixed cost 412800 341700 71100

Ner operatinf profit (loss) 32200 2300 29900 (Decrease)

(1b) No, the housekeeping program should not be discontinued , becasue after discontinuing the total profit will be reduced to $2300 which is lower than the $32200

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