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: Home Meals On House- Nursing $ 928,000 $ 265,000 $ 407,000 $ 256,000 115,000 Total Wheels keeping Revenues 468,000 460,000 Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead* 194,000 150,000 213,000 159,000 97,000 69,000 43,200 115,400 185,600 413,200 8,100 20, 200 40,400 53,000 121,700 $ 46,800 $ 28, 300 $ 44,800 $(26,300) 40,500 7,600 38,700 81,400 20,400 15,400 36, 300 51, 200 123, 300 168, 200 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 $46,800 to be unsatisfactory; therefore, she is considering the possibility of 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. 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?
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: Home Meals On House- Nursing $ 928,000 $ 265,000 $ 407,000 $ 256,000 115,000 Total Wheels keeping Revenues 468,000 460,000 Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead* 194,000 150,000 213,000 159,000 97,000 69,000 43,200 115,400 185,600 413,200 8,100 20, 200 40,400 53,000 121,700 $ 46,800 $ 28, 300 $ 44,800 $(26,300) 40,500 7,600 38,700 81,400 20,400 15,400 36, 300 51, 200 123, 300 168, 200 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 $46,800 to be unsatisfactory; therefore, she is considering the possibility of 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. 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?
Chapter15: Choice Of Business Entity—other Considerations
Section: Chapter Questions
Problem 71P
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Req 1A
Reg 18
Req 2A
Req 28
What is the financial advantage (disadvantage) of discontinuing the Housekeeping program?
Transcribed Image Text: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:
Home
Meals On
House-
keeping
265,000 $ 407,000 $ 256,00e
159,000
97,000
Total
Nursing
Wheels
$ 928,000
468,000
460,000
Revenues
Variable expenses
Contribution margin
Fixed expenses:
Depreciation
Liability insurance
Program administrators' salaries
115,000
194, 000
213,000
150,000
69,000
43, 200
115,400
185,600
413,200
8,100
20, 200
40,400
53,000
121,700
40,500
7,600
38,700
81,400
168, 200
20,400
15,400
36,300
51, 200
General administrative overhead*
Total fixed expenses
123,300
$ 46,800 $ 28,300 $ 44,800 $(26,300)
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 $46,800 to
be unsatisfactory; therefore, she is considering the possibility of 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.
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?
Complete this question by entering your answers in the tabs below.
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