Meals OnWheels$ 402,000House-Home Nursing$ 261,000112,000Totalkeeping$ 919,000461,000Revenues256,000Variable expenses193,000209,000156,000Contribution marginFixed expenses:458,000149,000100,000DepreciationLiability insuranceProgram administrators' salaries40,8007,40038,70080,40069,50043,4008,60020, 20020,10015,80036,30051, 200123,400$ (23,400)40,90052, 200115,900General administrative overhead*183,800Total fixed expenses412,600121,900167,300Net operating income (loss)$ 45,400$ 27, 100$ 41,700*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 $45,400 tobe 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 theprogram were discontinued, the van would be donated to a charitable organization. None of the general administrative overheadwould be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administratorwould 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.2-b. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of thevarious services?

Solution 1-a: Computation of Financial Advantage (Disadvantage) of discontinuing House-keeping…

Total Hôme Nursing wheels keeping $ 919,000 461,000 458,000 $ 261,000 112,000 149,000 $ 256,000 156,000 100,000 enues iable expenses cribution margin ed expenses: epreciation iability insurance rogram administrators' salaries $ 402,000 193,000 209,000 69,500 43,400 115,900 183,800 412,600 $ 45,400 8,600 20, 200 40,900 52,200 40,800 7,400 38,700 80,400 167,300 20,100 15,800 36,300 51,200 eneral administrative overhead* al fixed expenses 121,900 123,400 operating income (loss) $ 27,100 $ 41,700 $ (23,400)

Total Hôme Nursing wheels keeping $ 919,000 461,000 458,000 $ 261,000 112,000 149,000 $ 256,000 156,000 100,000 enues iable expenses cribution margin ed expenses: epreciation iability insurance rogram administrators' salaries $ 402,000 193,000 209,000 69,500 43,400 115,900 183,800 412,600 $ 45,400 8,600 20, 200 40,900 52,200 40,800 7,400 38,700 80,400 167,300 20,100 15,800 36,300 51,200 eneral administrative overhead* al fixed expenses 121,900 123,400 operating income (loss) $ 27,100 $ 41,700 $ (23,400)

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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