Concept explainers
PROBLEM 12-19 Dropping or Retaining a Segment LO12-2
Jackson Country Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Jackson Country area. Three services are provided for seniors—home nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow:
Revenues Variable expenses |
Total $900,000 490,000 |
Home Nursing $260,000 120,000 |
Meals On Wheels $400,000 210,000 |
House keeping $240,000 160,000 |
Contribution margin | 410,000 | 140,000 | 190,000 | 80,000 |
Fixed expenses: | ||||
68,000 | 8,000 | 40,000 | 20,000 | |
Liability insurance | 42,000 | 20,000 | 7,000 | 15,000 |
Program administrators’ salaries .... | 115,000 | 40,000 | 38,000 | 37,000 |
General administrative overhead* ... | 180,000 | 52,000 | 80,000 | 48,000 |
Total fixed expenses | 405,000 | 120,000 | 165,000 | 120,000 |
Net operating income (loss) | $ 5,000 |
$ 20,000 | $ 25,000 | $ (40,000) |
*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 $5,000 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 carry7 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:
- What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? Should the Housekeeping program be discontinued1 Explain.
- Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run financial viability of its various services.
Want to see the full answer?
Check out a sample textbook solutionChapter 13 Solutions
MANAG.ACCOUNTING-CONNECT ACCESS >CUSTOM<
- TB Problem Qu. 6A-70 (Algo) Grawburg Incorporated maintains a call center to take... Grawburg Incorporated maintains a call center to take orders, answer questions, and handle complaints. The costs of the call center for a number of recent months are listed below: April May June July August Calls. Taken 8,460 8,429 8,470 8,469 8,433 $ 91,567 September 8,444 $ 91,605 October 8,486 $ 91,831 November 8,474 $91,787 Management believes that the cost of the call center is a mixed cost that depends on the number of calls taken. Call Center Cost $ 91,717 $91,548 $ 91,777 $ 91,759 Required: Estimate the variable cost per call and fixed cost per month using the least-squares regression method. (Round the "Variable cost" to 2 decimal places and the "Fixed cost" to the nearest dollar amount.) Variable cost Fixed cost Answer is complete but not entirely correct. $ 10.05 per call 6,573 per month $arrow_forward6.2 Refer to Problem 6.1. Assume that the three patient services departments are adult services, pediatric services, and other services. The patient services revenue and hours of housekeeping services for each department are as follows: Department Revenue Housekeeping Hours Adult Services $3,000,000 1,500 Pediatric Services 1,500,000 3,000 Other Services 500,000 Total $5,000,000 500 5,000 a. What is the dollar allocation to each patient services department if patient services revenue is used as the cost driver? b. What is the dollar allocation to each patient services department if hours of housekeeping support is used as the cost driver? c. What is the difference in the allocation to each department. between the two drivers? d. Which of the two drivers is better? Why?arrow_forwardEXERCISE 6–4 Basic Segmented Income Statement LO6-4 Roval Lawncare Company produces and sells two packaged products-Weedban and Greengrow. Revenue and cost information relating to the products follow: Product Weedban Greengrow $7.50 Selling price per unit Variable expenses per unit $6.00 $2.40 $5.25 $45,000 $21,000 Traceable fixed expenses per yeararrow_forward
- Question 12 Novak Kars provides shuttle service between four hotels near a medical center and an international airport. Novak Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month’s activity in the form of a cost-volume-profit income statement is shown below. Fare revenues (1,400 fares) $28,000 Variable costs Fuel $5,040 Tolls and parking 2,520 Maintenance 840 8,400 Contribution margin 19,600 Fixed costs Salaries 15,200 Depreciation 1,260 Insurance 970 17,430 Net income $2,170arrow_forwardQuestion content area top Part 1 Latesha Moore has a choice at work between a traditional health insurance plan that pays 80 percent of the cost of doctor visits after a $250 deductible and an HMO that charges a $55 co-payment per visit plus a $1919 monthly premium deduction from her paycheck. Latesha anticipates seeing a doctor once a month for her high blood pressure. The cost of each office visit is $6060. She normally sees the doctor an average of three times a year for other health concerns. Comment on the difference in costs between the two health-care plans and the advantages and disadvantages of each. Question content area bottom Part 1 Latesha would pay an annual out-of-pocket cost with the traditional plan of $380380. (Round to the nearest dollar.) Part 2 Latesha would pay an annual out-of-pocket cost with the HMO plan ofarrow_forwardProblem 18-06 b-d Sunland Hardware takes pride as the “shop around the corner” that can compete with the big-box home improvement stores by providing good service from knowledgeable sales associates (many of whom are retired local handymen). Sunland has developed the following two revenue arrangements to enhance its relationships with customers and increase its bottom line. 1. Sunland sells a specialty portable winch that is popular with many of the local customers for use at their lake homes (putting docks in and out, launching boats, etc.). The Sunland winch is a standard manufacture winch that Sunland modifies so the winch can be used for a variety of tasks. Sunland sold 60 of these winches during 2020 at a total price of $18,600, with a warranty guarantee that the product was free of any defects. The cost of winches sold is $17,600. The assurance warranties extend for a 3-year period with an estimated cost of $1,800. In addition, Sunland sold extended warranties related to…arrow_forward
- QUESTION 38 Last month, Jeff applied to three colleges (X, Y, and Z). Before applying he and his family had visited the all three colleges. Jeff has received admissions from Colleges X and Y. He is trying to decide which college he will attend. The following information is available: College X College Y (1) Cost of attendance $30,000 $21,000 (2) Program quality Excellent Average (3) Campus visit cost $900 $300 (4) Location big city big city (5) Scholarship $10,000 $10,000 Select the items that are relevant to Jeff's decision. A. (2), (4) only B. (1), (2), (3) only C. (1), (2) only D. (1), (3), (5) only E. (1), (3) onlyarrow_forwardPROBLEM 7-20 Evaluating the Profitability of Services LO7-2, LO7-3, L07-4, L07-5 Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $28 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on remote ranches that require considerable travel time. The owner's daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear in the pictures below: Job support consists of receiving calls from potential customers at the home office, schedulingjobs, billing, resolving issues, and so on.Required:1.Using Exhibit 7-6 as a…arrow_forwardPROBLEM 7-20 Evaluating the Profitability of Services LO7-2, LO7-3, L07-4, L07-5 Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $28 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on remote ranches that require considerable travel time. The owner's daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear in the pictures below: Job support consists of receiving calls from potential customers at the home office, schedulingjobs, billing, resolving issues, and so on.Required: 4. The revenue from the…arrow_forward
- Summary Data for April Support Department Support Departments Production Departments Information Research and Technology Travel Service Analysis Audit Tax Consulting Total IT: Number of employees TS: Number of trips 9 5 15 120 150 110 409 15 12 10 120 160 520 837 RA: Number of requests Costs to Allocate 15 10 4 125 120 280 554 $ 810,000.00 $125,000.00 $1,280,000.00 $ $ $ $2,215,000.00 Question Answer 1. Which of the following is the closest approximation of the sales forecast's upper confidence bound for the 1/1/2028 quarter? 2. Based on the graph and the breadth of the confidence intervals, which seems easier to predict, sales or income before extraordinary items? 3. What is the sales forecast's upper confidence bound for the 10/1/2027 quarter? 4. What is the forecast lower confidence bound for the 4/1/2027 quarter? 5. What is the forecast for income before extraordinary items for Nintendo for the quarter starting 10/1/2027?arrow_forward+ I/ MN * 00 因 44 2 t-Chapter 11 & 13 Review Saved Help Save & Exit Palace Company has two service departments and two user departments. The number of employees in each department is: Personnel Cafeteria 25 Producing Department A Producing Department B 067 255 580 The fixed costs of the Personnel Department are allocated on a basis of the number of employees. If these costs are budgeted at $96,280 during a given period, the amount of cost allocated to the Cafeteria under the step method would be: Multiple Choice < Prev 7 of 20 115 10 e here to search 4/2 PrtSc Delete +D E3 F7 F8 F10 F11 F12 F5 61 反 FA & %23 5. 9. G 4T H. B Z Alt Ctrlarrow_forwardINTEGRATED BASIC EDUCATION SENIOR HIGH SCHOOL DEPARTMENT Socially Responsoile Leaders Mahlng a Difference 3. Twenty-two percent of Charmaine's monthly salary is deducted for withholding. If those deductions total Php2,090.00, what is her salary? itarrow_forward
- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningPFIN (with PFIN Online, 1 term (6 months) Printed...FinanceISBN:9781337117005Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning