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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 $ 922,000 $ 263,000 $ 405,000 $ 254,000
Variable expenses 465,000116,000193,000156,000
Contribution margin 457,000147,000212,00098,000
Fixed expenses:
Depreciation 69,3008,70040,40020,200
Liability insurance 44,10021,0007,40015,700
Program administrators salaries 115,90040,70038,80036,400
General administrative overhead*184,40052,60081,00050,800
Total fixed expenses 413,700123,000167,600123,100
Net operating income (loss) $ 43,300 $ 24,000 $ 44,400 $ (25,100)
*Allocated on the basis of program revenues.
The head administrator of Sunshine Services, Patsy Pearsall, considers last years net operating income of $43,300 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?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:
*Allocated on the basis of program revenues.
The head administrator of Sunshine Services, Patsy Pearsall, considers last year's net operating income of $43,300 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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