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	$	919,000	$	264,000	$	402,000	$	253,000
Variable expenses		468,000		114,000		199,000		155,000
Contribution margin		451,000		150,000		203,000		98,000
Fixed expenses:
Depreciation		69,800		8,400		40,700		20,700
Liability insurance		43,400		20,200		8,000		15,200
Program administrators salaries		116,000		40,400		38,800		36,800
General administrative overhead*		183,800		52,800		80,400		50,600
Total fixed expenses		413,000		121,800		167,900		123,300
Net operating income (loss)	$	38,000	$	28,200	$	35,100	$	(25,300)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organizations finances and considers the net operating income of $38,000 last year to be too small. (Last years results were very similar to the results for previous years and are representative of what would be expected in the future.) Therefore, she has asked for more information about the financial advisability of discontinuing the housekeeping program.

The depreciation in housekeeping is for a van that transports 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 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:

1a.	What is the impact on net operating income by discontinuing housekeeping program? (Input the amount as a positive value.)

(Click to select)DecreaseIncrease in net operating income by

$

1b.

Should the housekeeping program be discontinued?

	Yes
	No

2.

Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services.

Yes

No

Climate-Control, Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a thermostat to Climate-Control for $23 per unit. To evaluate this offer, Climate-Control, Inc., has gathered the following information relating to its own cost of producing the thermostat internally:

	Per Unit		14,300 Units per year
Direct materials	$	5	$	71,500
Direct labor		7		100,100
Variable manufacturing overhead		2		28,600
Fixed manufacturing overhead, traceable		10*		143,000
Fixed manufacturing overhead, common, but allocated		9		128,700
Total cost	$	33	$	471,900

*40% supervisory salaries; 60% depreciation of special equipment (no resale value).

Required:

1a.	Assuming that the company has no alternative use for the facilities now being used to produce the thermostat, compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to nearest dollar amount.)

	Make	Buy
Total relevant cost (14,300 units)	$	$

1b.

Should the outside supplier's offer be accepted?

	Accept
	Reject

2a.

Suppose that if the thermostats were purchased, Climate-Control, Inc., could use the freed capacity to launch a new product. The segment margin of the new product would be $91,500 per year. Compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to nearest dollar amount.)

	Make	Buy
Total relevant cost (14,300 units)	$	$

2b.

Should Climate-Control, Inc., accept the offer to buy the thermostats from the outside supplier for $23 each?

Reject

Accept

Solex Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $100,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: product X, $55,000; product Y, $93,000; and product Z, $64,000.

Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities. The additional processing costs and the sales value after further processing for each product (on an annual basis) are shown below:

Product	Additional Processing Costs		Sales Value after Further Processing
X	$	38,000	$	81,000
Y	$	39,000	$	162,000
Z	$	10,000	$	82,000

Required:
a.	Compute the incremental profit (loss) for each product. (Loss amounts should be indicated with a minus sign.)

	Product X	Product Y	Product Z
Incremental profit (loss)	$	$	$

Blueline Tours, Inc., operates tours throughout the United States. A study has indicated that some of the tours are not profitable, and consideration is being given to dropping these tours to improve the companys overall operating performance.

One such tour is a two-day Historic Mansions bus tour conducted in the southern states. An income statement from a typical Historic Mansions tour is given below:

Ticket revenue (105 seat capacity 40% occupancy $70 ticket price per person)	$	2,940	100	%
Variable expenses ($14.00 per person)		588	20
Contribution margin		2,352	80	%
Tour expenses:
Tour promotion	$	750
Salary of bus driver		380
Fee, tour guide		700
Fuel for bus		200
Depreciation of bus		500
Liability insurance, bus		150
Overnight parking fee, bus		70
Room and meals, bus driver and tour guide		190
Bus maintenance and preparation		220
Total tour expenses		3,160
Net operating loss	$	(808)

The following additional information is available about the tour:

a.	Bus drivers are paid fixed annual salaries; tour guides are paid for each tour conducted.
b.	The "Bus maintenance and preparation" cost is an allocation of the salaries of mechanics and other service personnel who are responsible for keeping the companys fleet of buses in good operating condition.
c.	Depreciation of buses is due to obsolescence. Depreciation due to wear and tear is negligible.
d.	Liability insurance premiums are based on the number of buses in the companys fleet.
e.	Dropping the Historic Mansions bus tour would not allow Blueline Tours to reduce the number of buses in its fleet, the number of bus drivers on the payroll, or the size of the maintenance and preparation staff.

Required:

By how much will the profits increase or decrease if this tour is discontinued? (Input the amount as a positive value.)

Profits would (Click to select)decreaseincrease by

$