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: Total Home Nursing Meals On Wheels House-keeping Revenues $ 919,000 $ 262,000 $ 402,000 $ 255,000 Variable expenses 471,000 112,000 205,000 154,000 Contribution margin 448,000 150,000 197,000 101,000 Fixed expenses: Depreciation 69,700 8,200 40,800 20,700 Liability insurance 43,100 20,100 7,400 15,600 Program administrators’ salaries 116,600 40,900 38,700 37,000 General administrative overhead* 183,800 52,400 80,400 51,000 Total fixed expenses 413,200 121,600 167,300 124,300 Net operating income (loss) $ 34,800 $ 28,400 $ 29,700 $ (23,300) *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 $34,800 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. 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? Sub parts 1a and 2a only
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:
| Total | Home Nursing | Meals On Wheels | House-keeping | |
|---|---|---|---|---|
| Revenues | $ 919,000 | $ 262,000 | $ 402,000 | $ 255,000 |
| Variable expenses | 471,000 | 112,000 | 205,000 | 154,000 |
| Contribution margin | 448,000 | 150,000 | 197,000 | 101,000 |
| Fixed expenses: | ||||
| 69,700 | 8,200 | 40,800 | 20,700 | |
| Liability insurance | 43,100 | 20,100 | 7,400 | 15,600 |
| Program administrators’ salaries | 116,600 | 40,900 | 38,700 | 37,000 |
| General administrative overhead* | 183,800 | 52,400 | 80,400 | 51,000 |
| Total fixed expenses | 413,200 | 121,600 | 167,300 | 124,300 |
| Net operating income (loss) | $ 34,800 | $ 28,400 | $ 29,700 | $ (23,300) |
*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 $34,800 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. 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?
Sub parts 1a and 2a only
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