Jackson County Senior Services is a nonprofit organization devoted to providing
ID: 2475142 • Letter: J
Question
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:
The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organization’s finances and considers the net operating income of $40,400 last year to be razor-thin. (Last year's results were very similar to the results for previous years and are representative of what would be expected in the future.) She feels that the organization should be building its financial reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ms. Miyama asked for more information about the financial advisability of perhaps 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.
What is the impact on net operating income by discontinuing housekeeping program? (Decreases should be indicated by a minus sign.)
keeping Revenues $ 919,000 $ 268,000 $ 400,000 $ 251,000 Variable expenses 464,000 117,000 192,000 155,000 Contribution margin 455,000 151,000 208,000 96,000 Fixed expenses: Depreciation 70,200 8,700 40,600 20,900 Liability insurance 44,100 20,400 7,900 15,800 Program administrators’ salaries 116,500 40,900 38,900 36,700 General administrative overhead* 183,800 53,600 80,000 50,200 Total fixed expenses 414,600 123,600 167,400 123,600 Net operating income (loss) $ 40,400 $ 27,400 $ 40,600 $ (27,600)
The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organization’s finances and considers the net operating income of $40,400 last year to be razor-thin. (Last year's results were very similar to the results for previous years and are representative of what would be expected in the future.) She feels that the organization should be building its financial reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ms. Miyama asked for more information about the financial advisability of perhaps 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 impact on net operating income by discontinuing housekeeping program? (Decreases should be indicated by a minus sign.)
Total If Difference: Net Operating Current Total Housekeeping Is Dropped Income Increase or (Decrease) Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators’ salaries General administrative overhead Total fixed expenses Net operating income (loss)Explanation / Answer
1-a.
2. Segmented Income Statement:
Current Total Housekeeping is dropped Income increase or decrease Revenue 919,000 668,000 Variable expenses 464,000 309,000 Contribution margin 455,000 359,000 Fixed expenses Depreciation 70,200 49,300 Liability insurance 44,100 28,300 Program administrator's salaries 116,500 79,800 General administrative overheads 183,800 183,800 Total fixed expenses 414,600 341,200 Net operating income ( loss) 40,400 17,800 (22,600)Related Questions
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