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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 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 $ $ $ $
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.
The head administrator of Sunshine Services, Patsy Pearsall, considers last years net operating income of $ 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:
a What is the financial advantage disadvantage of discontinuing the Housekeeping program?
b Based on the financial advantage disadvantage of discontinuing the Housekeeping program calculated in requirement Req A should the Housekeeping program be discontinued?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 seniorshome nursing, Meals On Wheels, and housekeeping. Data on revenue
and expenses for the past year follow:
Allocated on the basis of program revenues.
The head administrator of Sunshine Services, Patsy Pearsall, considers last year's net operating income of $ 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:
a What is the financial advantage disadvantage of discontinuing the Housekeeping program?
b Based on the financial advantage disadvantage of discontinuing the Housekeeping program calculated in requirement Req
should the Housekeeping program be discontinued?
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