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 fo seniors-home nursing, Meals On Wheels, and housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform tests ordered by the physicians. The Meals On Wheels program delivers a hot meal once a day to each senior enrolled in the program. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for the past year follow. Home Meals On House Nursing Tota Wheels keeping Revenues 919,000 $262,000 $404,000 253,000 Variable expenses 464.000 114.000 194.000 156.000 97,000 Contribution margin 455.000 48,000 210,000 Fixed expenses 40,300 Depreciation 69.600 8.800 20.500 15,700 Liability insurance 43.600 20.800 7.100 Program administrators' salaries 11 40.200 38,900 36.500 General administrative overhead 183.800 52,400 80.800 50.600 Total fixed expenses 412,600 122,200 67,100 23.300 Net operating income (loss) 42,400 25,800 42,900 (26,300) 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 $42,400 last year to be too smal Last year's 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 financia reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ms. Miyama asked for more information about the financial advisability 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. Depreciation charges assume zero salvage value. None ofthe 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: 1a. What is the impact on net operating income by discontinuing housekeeping program? Diffe keeping Is ncome increas Current Tota Dropped or (Decrease Revenues Variable expenses 0 0 0 Contribution margin Fixed expenses Depreciation Liability insurance Program administrators' salaries General administrative overhead 0 0 0 Total fixed expenses Net operating income (loss)
