Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 seniorshome 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 $ 931,000 $ 269,000 $ 409,000 $ 253,000
Variable expenses 470,000 113,000 200,000 157,000
Contribution margin 461,000 156,000 209,000 96,000
Fixed expenses:
Depreciation 70,800 9,000 40,800 21,000
Liability insurance 43,900 20,300 7,800 15,800
Program administrators salaries 116,400 40,800 38,700 36,900
General administrative overhead* 186,200 53,800 81,800 50,600
Total fixed expenses 417,300 123,900 169,100 124,300
Net operating income (loss) $ 43,700 $ 32,100 $ 39,900 $ (28,300)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $43,700 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?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing And Assurance Services

Authors: William Messier, Steven Glover, Douglas Prawitt

8th Edition

0078025435, 9780078025433

More Books

Students also viewed these Accounting questions