Jackson County Senior Services is a nonprofit organization providing three services to seniors who live in their own homes—home nursing, Meals on Wheels, and housekeeping. Revenue and expense data for the past year follow: Total Home Nursing Meals on Wheels Housekeeping Revenues $ 925,000 $ 266,000 $ 409,000 $ 250,000 Variable expenses 472,000 116,000 203,000 153,000 Contribution margin 453,000 150,000 206,000 97,000 Fixed expenses: Depreciation 70,500 8,900 40,900 20,700 Liability insurance 43,900 20,600 7,700 15,600 Program administrators’ salaries 115,500 40,200 38,600 36,700 General administrative overhead* 185,000 53,200 81,800 50,000 Total fixed expenses 414,900 122,900 169,000 123,000 Net operating income (loss) $ 38,100 $ 27,100 $ 37,000 $ (26,000) *Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, is considering discontinuing the housekeeping program. The depreciation in housekeeping is for a small van 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 was 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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Jackson County Senior Services is a nonprofit organization providing three services to seniors who live in their own homes—home nursing, Meals on Wheels, and housekeeping. Revenue and expense data for the past year follow:

	Total	Home Nursing	Meals on Wheels	Housekeeping
Revenues	$ 925,000	$ 266,000	$ 409,000	$ 250,000
Variable expenses	472,000	116,000	203,000	153,000
Contribution margin	453,000	150,000	206,000	97,000
Fixed expenses:
Depreciation	70,500	8,900	40,900	20,700
Liability insurance	43,900	20,600	7,700	15,600
Program administrators’ salaries	115,500	40,200	38,600	36,700
General administrative overhead*	185,000	53,200	81,800	50,000
Total fixed expenses	414,900	122,900	169,000	123,000
Net operating income (loss)	$ 38,100	$ 27,100	$ 37,000	$ (26,000)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, is considering discontinuing the housekeeping program.

The depreciation in housekeeping is for a small van 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 was 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?

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions