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Sunshine Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within Southern California. Three services are
Sunshine Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within Southern California. Three services are provided for seniors-home nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow: Home Meals On House- Total Nursing Wheels keeping $ 936, eee $ 268,eee $ 498,eee $ 260, eee 470, eee 115, eee 20e,aee 155, eee 466, eee 153, eee 208.ee 105,eee Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead Total fixed expenses Net operating income (loss) 69,9ee 8,5ee 43,900 20,4ee 115, 30e 40, 4ee 187, 2ee 53,6ee 416,3ee 122,9ee $ 49,780 $ 30,100 $ 40,7ee 20,7ee 7,70e 15,800 38,500 36,40e 81,600 52,eee 168,50e 124,9ee 39,500 $(19,900) *Allocated on the basis of program revenues. The head administrator of Sunshine Services, Patsy Pearsall, considers last year's net operating Income of $49,700 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. Based on the financial advantage (disadvantage) of discontinuing the Housekeeping program calculated In requirement Req 1A, should the Housekeeping program be discontinued
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