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1-a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? 1-b. 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?

1-a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? 1-b. 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?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1-a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program?

1-b. 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?

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: Home Meals On House- Nursing $ 921,000 $ 263,000 $ 407,000 119,000 Total keeping $ 251,000 159,000 92,000 Wheels Revenues Variable expenses 487,000 434,000 209,000 198,000 Contribution margin 144,000 Fixed expenses: Depreciation Liability insurance Program administrators' salaries 69,500 43,700 115,400 8,300 20,800 40,600 40,400 7,500 38,100 81,400 20,800 15,400 36,700 General administrative overhead* 184,200 412,800 52,600 122,300 50,200 123,100 Total fixed expenses 167,400 Net operating income (loss) $ 21,200 $ 21,700 $ 30,600 $ (31,100) *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 $21,200 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.
Transcribed Image Text: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: Home Meals On House- Nursing $ 921,000 $ 263,000 $ 407,000 119,000 Total keeping $ 251,000 159,000 92,000 Wheels Revenues Variable expenses 487,000 434,000 209,000 198,000 Contribution margin 144,000 Fixed expenses: Depreciation Liability insurance Program administrators' salaries 69,500 43,700 115,400 8,300 20,800 40,600 40,400 7,500 38,100 81,400 20,800 15,400 36,700 General administrative overhead* 184,200 412,800 52,600 122,300 50,200 123,100 Total fixed expenses 167,400 Net operating income (loss) $ 21,200 $ 21,700 $ 30,600 $ (31,100) *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 $21,200 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.
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