ty 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 $ 928,000 $ 268,000 $ 405,000 $ 255,000 Variable expenses 468,000 113,000 203,000 152,000 Contribution margin 460,000 155,000 202,000 103,000 Fixed expenses: Depreciation 69,400 8,200 40,600 20,600 Liability insurance 43,500 20,200 7,600 15,700 Program administrators’ salaries 115,400 40,400 38,900 36,100 General administrative overhead* 185,600 53,600 81,000 51,000 Total fixed expenses 413,900 122,400 168,100 123,400 Net operating income (loss) $ 46,100 $ 32,600 $ 33,900 $ (20,400) *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 $46,100 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.

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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Please answer the question in its entirety. 1a, 1b, 2a, 2b

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	$ 928,000	$ 268,000	$ 405,000	$ 255,000
Variable expenses	468,000	113,000	203,000	152,000
Contribution margin	460,000	155,000	202,000	103,000
Fixed expenses:
Depreciation	69,400	8,200	40,600	20,600
Liability insurance	43,500	20,200	7,600	15,700
Program administrators’ salaries	115,400	40,400	38,900	36,100
General administrative overhead*	185,600	53,600	81,000	51,000
Total fixed expenses	413,900	122,400	168,100	123,400
Net operating income (loss)	$ 46,100	$ 32,600	$ 33,900	$ (20,400)

*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 $46,100 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.

2-b. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services?

**Segmented Income Statement Preparation**

This worksheet provides a template to prepare a segmented income statement for an organization with multiple service lines. The segments included are "Home Nursing," "Meals On Wheels," and "Housekeeping." The template consists of the following financial components:

1. **Revenues**: Total revenue generated by each segment and the organization as a whole.
2. **Variable Expenses**: Costs that vary with the level of output or sales within each segment.
3. **Contribution Margin**: The difference between revenues and variable expenses, indicating the segment’s contribution to covering fixed expenses and generating profit.
4. **Traceable Fixed Expenses**: Fixed costs directly attributable to each segment. This includes:
- Depreciation
- Liability Insurance
- Program Administrators’ Salaries
5. **Total Traceable Fixed Expenses**: Sum of all traceable fixed expenses for each segment.
6. **Program Segment Margins**: Contribution margin minus total traceable fixed expenses, showing profitability of each segment before general administrative expenses.
7. **General Administrative Overhead**: Costs not directly attributable to any single segment but necessary for overall operations.
8. **Net Operating Income (Loss)**: Final profitability measure after accounting for general administrative overhead.

Use the tabs "Req 1A," "Req 1B," "Req 2A," and "Req 2B" to input or view specific segment data and compute the final income statement.

**Interactive Elements:**
- The previous and next buttons, "Req 1B" and "Req 2B," allow you to navigate between different sections or requirements of the income statement.

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