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: Total Home Nursing Meals On Wheels House-keeping Revenues $ 923,000 $ 265,000 $ 405,000 $ 253,000 Variable expenses 470,000 111,000 202,000 157,000 Contribution margin 453,000 154,000 203,000 96,000 Fixed expenses: Depreciation 69,200 8,200 40,400 20,600 Liability insurance 43,800 20,300 7,600 15,900 Program administrators’ salaries 116,000 40,900 38,200 36,900 General administrative overhead* 184,600 53,000 81,000 50,600 Total fixed expenses 413,600 122,400 167,200 124,000 Net operating income (loss) $ 39,400 $ 31,600 $ 35,800 $ (28,000) *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 $39,400 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? 2-a. Prepare a properly formatted segmented income statement.
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:
| Total | Home Nursing | Meals On Wheels | House-keeping | |
|---|---|---|---|---|
| Revenues | $ 923,000 | $ 265,000 | $ 405,000 | $ 253,000 |
| Variable expenses | 470,000 | 111,000 | 202,000 | 157,000 |
| Contribution margin | 453,000 | 154,000 | 203,000 | 96,000 |
| Fixed expenses: | ||||
| 69,200 | 8,200 | 40,400 | 20,600 | |
| Liability insurance | 43,800 | 20,300 | 7,600 | 15,900 |
| Program administrators’ salaries | 116,000 | 40,900 | 38,200 | 36,900 |
| General administrative |
184,600 | 53,000 | 81,000 | 50,600 |
| Total fixed expenses | 413,600 | 122,400 | 167,200 | 124,000 |
| Net operating income (loss) | $ 39,400 | $ 31,600 | $ 35,800 | $ (28,000) |
*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 $39,400 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?
2-a. Prepare a properly formatted segmented income statement.
Segment reporting is the process of identifying and presenting financial information about different business segments within a company. A business segment is a part of an organization that operates in a specific geographical area, serves a particular type of customer, or offers a specific product or service.
The objective of segment reporting is to provide users of financial statements with a detailed analysis of the company's performance and financial position by different segments of its operations. This helps investors, analysts, and other stakeholders to make more informed decisions about the company's prospects and risks.
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