Problem 11-19 (Algo) Dropping or Retaining a Segment [LO11-2] (Req 1B and 2B are yeso questions not needed to answer these questions)
Problem 11-19 (Algo) Dropping or Retaining a Segment (LO11-2] 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 $ 926,000 473,000 453,000 Home Nursing $ 267,000 111,000 156,000 Meals On Wheels $ 402,000 204,000 198,000 House-keeping $ 257,000 158,000 99,000 Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead* Total fixed expenses Net operating income (loss) 69,000 44,500 114,900 185,200 413,600 $ 39,400 8,400 20,700 40,700 53,400 123,200 $ 32,800 40,300 7,900 38,200 80,400 166,800 $ 31,200 20,300 15,900 36,000 51,400 123,600 $ (24,600) *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 $39,400 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? Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Reg 2A Reg 2B What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? 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? Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2A Reg 2B Prepare a properly formatted segmented income statement. Meals On Total Home Nursing Wheels House- keeping Revenues Variable expenses Contribution margin Traceable fixed expenses Depreciation Liability insurance Program administrators' salaries Total traceable fixed expenses Program segment margins General administrative overhead Net operating income (loss)
