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: Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead* Total fixed expenses Net operating income (loss) Total $ 900,000 490,000 410,000 68,000 42,000 115,000 180,000 405,000 $ 5,000 Home Nursing $ 260,000 120,000 140,000 8,000 20,000 40,000 52,000 120,000 $ 20,000 Meals On Wheels $ 400,000 210,000 190,000 40,000 7,000 38,000 80,000 165,000 House-keeping $ 240,000 160,000 80,000 20,000 15,000 37,000 48,000 120,000 $ 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 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. Based on the financial advantage (disadvantage) of discontinuing the Housekeeping program calculated in requirement Req 1A, 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: Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead* Total fixed expenses Net operating income (loss) Total $ 900,000 490,000 410,000 68,000 42,000 115,000 180,000 405,000 $ 5,000 Home Nursing $ 260,000 120,000 140,000 8,000 20,000 40,000 52,000 120,000 $ 20,000 Meals On Wheels $ 400,000 210,000 190,000 40,000 7,000 38,000 80,000 165,000 House-keeping $ 240,000 160,000 80,000 20,000 15,000 37,000 48,000 120,000 $ 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 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. Based on the financial advantage (disadvantage) of discontinuing the Housekeeping program calculated in requirement Req 1A, 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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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:
Revenues
Variable expenses
Contribution margin
Fixed expenses:
Depreciation
Liability insurance
Program administrators' salaries
General administrative overhead*
Total fixed expenses
Net operating income (loss)
Total
$ 900,000
490,000
410,000
68,000
42,000
115,000
180,000
405,000
$ 5,000
Req 1A
Home Nursing
$ 260,000
120,000
140,000
Req 1B
Req 2A
Meals On
Wheels
$ 400,000
210,000
190,000
*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.
Required:
1-a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program?
Complete this question by entering your answers in the tabs below.
Req 2B
8,000
20,000
40,000
37,000
52,000
48,000
120,000
120,000
$ 20,000 $ 25,000 $ (40,000)
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.
40,000
7,000
38,000
80,000
165,000
1-b. Based on the financial advantage (disadvantage) of discontinuing the Housekeeping program calculated in requirement Req 1A,
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?
House-keeping
$ 240,000
160,000
80,000
20,000
15,000
What is the financial advantage (disadvantage) of discontinuing the Housekeeping program?
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