Question
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 | $ | 900,000 | $ | 260,000 | $ | 400,000 | $ | 240,000 |
Variable expenses | 490,000 | 120,000 | 210,000 | 160,000 | ||||
Contribution margin | 410,000 | 140,000 | 190,000 | 80,000 | ||||
Fixed expenses: | ||||||||
Depreciation | 68,000 | 8,000 | 40,000 | 20,000 | ||||
Liability insurance | 42,000 | 20,000 | 7,000 | 15,000 | ||||
Program administrators salaries | 115,000 | 40,000 | 38,000 | 37,000 | ||||
General administrative overhead* | 180,000 | 52,000 | 80,000 | 48,000 | ||||
Total fixed expenses | 405,000 | 120,000 | 165,000 | 120,000 | ||||
Net operating income (loss) | $ | 5,000 | $ | 20,000 | $ | 25,000 | $ | (40,000) |
*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 $48,800 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. 1. should the housekeeping program be discontinued? explain. show computations to support your answer. 2. recast the above data in a format that would be more useful to management in assessing the long-run finacial viability of the various services. |
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