Question

In: Accounting

Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who...

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 $ 927,000 $ 266,000 $ 406,000 $ 255,000
Variable expenses 479,000 120,000 205,000 154,000
Contribution margin 448,000 146,000 201,000 101,000
Fixed expenses:
Depreciation 69,900 8,500 40,800 20,600
Liability insurance 44,200 20,800 7,500 15,900
Program administrators’ salaries 115,200 40,500 38,600 36,100
General administrative overhead* 185,400 53,200 81,200 51,000
Total fixed expenses 414,700 123,000 168,100 123,600
Net operating income (loss) $ 33,300 $ 23,000 $ 32,900 $ (22,600)

*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 $33,300 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. 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?

Solutions

Expert Solution

1-a.

Current total Total if housekeeping is discontinued
Revenues $927,000 $672,000
Variable expenses 479,000 325,000
Contribution margin 448,000 347,000
Fixed expenses:
Depreciation 69,900 49,300
Liability insurance 44,200 28,300
Program administrators' salaries 115,200 79,100
General administrative overhead 185,400 185,400
Total fixed expenses 414,700 342,100
Net operating income (loss) $33,300 $4,900

The financial disadvantage of discontinuing housekeeping program is $28,400 (33,300-4,900).

1-b.

No, the housekeeping should not be discontinued.

2-a.

Total Home nursing Meals on wheels House-keeping
Revenues $927,000 $266,000 $406,000 $255,000
Variable expenses 479,000 120,000 205,000 154,000
Contribution margin 448,000 146,000 201,000 101,000
Fixed expenses (traceable)
Depreciation 69,900 8,500 40,800 20,600
Liability insurance 44,200 20,800 7,500 15,900
Program administrators' salaries 115,200 40,500 38,600 36,100
Total fixed expenses (traceable) 229,300 69,800 86,900 72,600
Segment margin 218,700 76,200 114,100 28,400
General administrative overhead 185,400
Net income $33.300

2-b.

Yes, a segmented income statement format will be more useful to management in assessing the long term financial viability of the various services.


Related Solutions

Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who...
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 $ 919,000 $ 264,000 $ 403,000 $ 252,000 Variable expenses 477,000 117,000 209,000 151,000 Contribution margin 442,000 147,000 194,000 101,000 Fixed expenses: Depreciation...
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who...
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 $ 929,000 $ 268,000 $ 409,000 $ 252,000 Variable expenses 471,000 111,000 201,000 159,000 Contribution margin 458,000 157,000 208,000 93,000 Fixed expenses: Depreciation...
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who...
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 $ 930,000 $ 266,000 $ 408,000 $ 256,000 Variable expenses 477,000 112,000 206,000 159,000 Contribution margin 453,000 154,000 202,000 97,000 Fixed expenses: Depreciation...
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who...
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 $ 262,000 $ 407,000 $ 259,000 Variable expenses 462,000 114,000 193,000 155,000 Contribution margin 466,000 148,000 214,000 104,000 Fixed expenses: Depreciation...
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who...
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 $ 262,000 $ 409,000 $ 252,000 Variable expenses 469,000 114,000 196,000 159,000 Contribution margin 454,000 148,000 213,000 93,000 Fixed expenses: Depreciation...
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who...
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 $ 930,000 $ 270,000 $ 403,000 $ 257,000 Variable expenses 469,000 115,000 196,000 158,000 Contribution margin 461,000 155,000 207,000 99,000 Fixed expenses: Depreciation...
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who...
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 $ 930,000 $ 269,000 $ 405,000 $ 256,000 Variable expenses 454,000 111,000 192,000 151,000 Contribution margin 476,000 158,000 213,000 105,000 Fixed expenses: Depreciation...
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who...
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 $ 262,000 $ 402,000 $ 259,000 Variable expenses 470,000 117,000 195,000 158,000 Contribution margin 453,000 145,000 207,000 101,000 Fixed expenses: Depreciation...
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who...
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 $ 930,000 $ 266,000 $ 407,000 $ 257,000 Variable expenses 471,000 110,000 210,000 151,000 Contribution margin 459,000 156,000 197,000 106,000 Fixed expenses: Depreciation...
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who...
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.       Homenursin Revenues.                     934000        269000 variable expenses.       479000.      117000 contribution margin.    455000.       152000 fixed expenses depreciation.                   69800.       8700 liability insurance.           43900.       20600 program administrators salaries 115500/40100 general administrative overhead 186800/53800...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT