Cumberland County Senior Services is a non-profit organization devoted to providing essential services to seniors who live in their own homes within the Cumberland County area. Three services are provided for seniors-home nursing, Meals on Wheels, and housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform tests ordered by their physicians. The Meals on Wheels program delivers a hot meal once a day to each senior enrolled in the program. The housekeeping service provides weekly housecleaning and maintenance services. 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 Operating income (loss). Total $1,062,000 592, 600 469,400 $ 74,840 48,660 126,700 212,400 462,600 6,800 Home Nursing $306,800 145,200 161,600 9,440 22,700 44,500 61,360 138,000 $ 23,600 Meals on Wheels $472,000 255,000 217,000 42,700 8,800 40,700 94,400 186, 600 $ 30,400 House- keeping $283,200 192,400 90,800 22,700 17,160 41,500 56,640 138,000 $(47,200) *Allocated on the basis of program revenues. The head administrator of Cumberland County Senior Services, Judith Ewa, is concerned about the organization's finances and considers the operating income of $6,800 last year to be razor-thin. (Last year's results were very similar to the results for previous years and are representative of what would be expected in the future.) She feels that the organization should be building its financial
Cumberland County Senior Services is a non-profit organization devoted to providing essential services to seniors who live in their own homes within the Cumberland County area. Three services are provided for seniors-home nursing, Meals on Wheels, and housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform tests ordered by their physicians. The Meals on Wheels program delivers a hot meal once a day to each senior enrolled in the program. The housekeeping service provides weekly housecleaning and maintenance services. 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 Operating income (loss). Total $1,062,000 592, 600 469,400 $ 74,840 48,660 126,700 212,400 462,600 6,800 Home Nursing $306,800 145,200 161,600 9,440 22,700 44,500 61,360 138,000 $ 23,600 Meals on Wheels $472,000 255,000 217,000 42,700 8,800 40,700 94,400 186, 600 $ 30,400 House- keeping $283,200 192,400 90,800 22,700 17,160 41,500 56,640 138,000 $(47,200) *Allocated on the basis of program revenues. The head administrator of Cumberland County Senior Services, Judith Ewa, is concerned about the organization's finances and considers the operating income of $6,800 last year to be razor-thin. (Last year's results were very similar to the results for previous years and are representative of what would be expected in the future.) She feels that the organization should be building its financial
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 39P
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Question
44.
Subject :- Accounting
Transcribed Image Text:Cumberland County Senior Services is a non-profit organization devoted to providing essential services to seniors who live in their
own homes within the Cumberland County area. Three services are provided for seniors-home nursing, Meals on Wheels, and
housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform
tests ordered by their physicians. The Meals on Wheels program delivers a hot meal once a day to each senior enrolled in the
program. The housekeeping service provides weekly housecleaning and maintenance services. 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
Operating income (loss)
Total
$1,062,000
592, 600
469,400
$
74,840
48, 660
126,700
212,400
462,600
Home
Nursing
$306,800
145,200
161,600
9,440
22,700
44,500
61,360
138,000
6,800 $ 23,600
Meals on
Wheels
$472,000
255,000
217,000
42,700
8,800
40,700
94,400
186, 600
$ 30,400
House-
keeping
$283,200
192,400
90,800
22,700
17,160
41,500
56,640
138,000
$(47,200)
*Allocated on the basis of program revenues.
The head administrator of Cumberland County Senior Services, Judith Ewa, is concerned about the organization's finances and
considers the operating income of $6,800 last year to be razor-thin. (Last year's results were very similar to the results for previous
years and are representative of what would be expected in the future.) She feels that the organization should be building its financial
reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ewa asked for more
information about the financial advisability of discontinuing the housekeeping program.
The depreciation in the housekeeping category 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. Depreciation charges assume zero
salvage value. 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:Required:
1-a. Compute the change in net operating income for the company as a whole if housekeeping program be discontinued.
in net operating income by
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