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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
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: Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead* Total fixed expenses Net operating income (loss) *Allocated on the basis of program revenues. Home Meals On House- Total Nursing Wheels keeping $927,000 $264,000 $406,000 $257,000 474,000 120,000 204,000 150,000 453,000 144,000 202,000 107,000 69,500 44,200 8,300 41,000 20,900 20,200 7,500 15,800 116,300 41,000 38,300 37,000 185,400 52,800 81,200 51,400 124,400 415,400 123,000 168,000 $ 37,600 $ 21,000 $ 34,000 $(17,400) The head administrator of Sunshine Services, Patsy Pearsall, considers last year's net operating income of $37,600 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? Complete this question by entering your answers in the tabs below.
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