Jackson County Senior Services is a nonprofit organizationdevoted to providing essential services to seniors who live intheir own homes within the Jackson County area. Three services areprovided for seniorsâhome nursing, Meals On Wheels, andhousekeeping. Data on revenue and expenses for the past yearfollow:
Total HomeNursing Meals OnWheels House-
keeping Revenues $ 929,000 $ 268,000 $ 404,000 $ 257,000 Variableexpenses 470,000 117,000 200,000 153,000 Contributionmargin 459,000 151,000 204,000 104,000 Fixed expenses: Depreciation 69,500 8,300 40,900 20,300 Liability insurance 43,800 20,800 7,700 15,300 Programadministratorsâ salaries 115,700 41,000 38,400 36,300 Generaladministrative overhead* 185,800 53,600 80,800 51,400 Total fixedexpenses 414,800 123,700 167,800 123,300 Net operating income(loss) $ 44,200 $ 27,300 $ 36,200 $ (19,300)
*Allocated on the basis ofprogram revenues.
The head administrator of JacksonCounty Senior Services, Judith Miyama, is concerned about theorganizationâs finances and considers the net operating income of$44,200 last year to be razor-thin. (Last year's results were verysimilar to the results for previous years and are representative ofwhat would be expected in the future.) She feels that theorganization should be building its financial reserves at a morerapid rate in order to prepare for the next inevitable recession.After seeing the above report, Ms. Miyama asked for moreinformation about the financial advisability of perhapsdiscontinuing the housekeeping program.
The depreciation in housekeepingis for a small van that is used to carry the housekeepers and theirequipment from job to job. If the program were discontinued, thevan would be donated to a charitable organization. None of thegeneral administrative overhead would be avoided if thehousekeeping program were dropped, but the liability insurance andthe salary of the program administrator would be avoided.
Required:
1-a. What is the impact on net operating income by discontinuinghousekeeping program? (Decreases should be indicated by aminus sign.)
Total If Difference: Net Operating Current Total Housekeeping Is Dropped Income Increase or (Decrease) Revenues Variableexpenses Contribution margin Fixedexpenses: Depreciation Liabilityinsurance Programadministratorsâ salaries Generaladministrative overhead Totalfixed expenses Net operating income(loss)
1-b. Should thehousekeeping program be discontinued? Yes No
2-a. Prepare a segmented income statement.
Home Nursing Meals On Wheels House keeping Totals Revenues Variable expenses Contribution margin Traceable fixed expenses: Depreciation Liability insurance Program administratorsâsalaries Total traceable fixedexpenses Program segment margins General administrativeoverhead Net operating income(loss)
2-b. Would a segmented income statement format be more useful tomanagement in assessing the long-run financial viability of thevarious services.
Yes No
Jackson County Senior Services is a nonprofit organizationdevoted to providing essential services to seniors who live intheir own homes within the Jackson County area. Three services areprovided for seniorsâhome nursing, Meals On Wheels, andhousekeeping. Data on revenue and expenses for the past yearfollow: |
| Total | HomeNursing | Meals OnWheels | House- keeping | |||||
| Revenues | $ | 929,000 | $ | 268,000 | $ | 404,000 | $ | 257,000 |
| Variableexpenses | 470,000 | 117,000 | 200,000 | 153,000 | ||||
| Contributionmargin | 459,000 | 151,000 | 204,000 | 104,000 | ||||
| Fixed expenses: | ||||||||
| Depreciation | 69,500 | 8,300 | 40,900 | 20,300 | ||||
| Liability insurance | 43,800 | 20,800 | 7,700 | 15,300 | ||||
| Programadministratorsâ salaries | 115,700 | 41,000 | 38,400 | 36,300 | ||||
| Generaladministrative overhead* | 185,800 | 53,600 | 80,800 | 51,400 | ||||
| Total fixedexpenses | 414,800 | 123,700 | 167,800 | 123,300 | ||||
| Net operating income(loss) | $ | 44,200 | $ | 27,300 | $ | 36,200 | $ | (19,300) |
| *Allocated on the basis ofprogram revenues. |
The head administrator of JacksonCounty Senior Services, Judith Miyama, is concerned about theorganizationâs finances and considers the net operating income of$44,200 last year to be razor-thin. (Last year's results were verysimilar to the results for previous years and are representative ofwhat would be expected in the future.) She feels that theorganization should be building its financial reserves at a morerapid rate in order to prepare for the next inevitable recession.After seeing the above report, Ms. Miyama asked for moreinformation about the financial advisability of perhapsdiscontinuing the housekeeping program. |
| The depreciation in housekeepingis for a small van that is used to carry the housekeepers and theirequipment from job to job. If the program were discontinued, thevan would be donated to a charitable organization. None of thegeneral administrative overhead would be avoided if thehousekeeping program were dropped, but the liability insurance andthe salary of the program administrator would be avoided.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2-b. | Would a segmented income statement format be more useful tomanagement in assessing the long-run financial viability of thevarious services. | ||||
|
Related questions
ackson County SeniorServices is a nonprofit organization devoted to providing essentialservices to seniors who live in their own homes within the JacksonCounty area. Three services are provided for seniorsâhome nursing,Meals On Wheels, and housekeeping. Data on revenue and expenses forthe past year follow:
| Total | HomeNursing | Meals OnWheels | House- keeping | |||||
| Revenues | $ | 927,000 | $ | 265,000 | $ | 409,000 | $ | 253,000 |
| Variableexpenses | 457,000 | 112,000 | 192,000 | 153,000 | ||||
| Contributionmargin | 470,000 | 153,000 | 217,000 | 100,000 | ||||
| Fixedexpenses: | ||||||||
| Depreciation | 69,300 | 8,900 | 40,100 | 20,300 | ||||
| Liabilityinsurance | 43,600 | 20,900 | 7,300 | 15,400 | ||||
| Programadministratorsâ salaries | 115,500 | 40,800 | 38,700 | 36,000 | ||||
| Generaladministrative overhead* | 185,400 | 53,000 | 81,800 | 50,600 | ||||
| Total fixedexpenses | 413,800 | 123,600 | 167,900 | 122,300 | ||||
| Net operatingincome (loss) | $ | 56,200 | $ | 29,400 | $ | 49,100 | $ | (22,300) |
*Allocated on the basis of program revenues.
The head administratorof Jackson County Senior Services, Judith Miyama, considers lastyearâs net operating income of $56,200 to be unsatisfactory;therefore, she is considering the possibility of discontinuing thehousekeeping program.
The depreciation inhousekeeping is for a small van that is used to carry thehousekeepers and their equipment from job to job. If the programwere discontinued, the van would be donated to a charitableorganization. None of the general administrative overhead would beavoided if the housekeeping program were dropped, but the liabilityinsurance and the salary of the program administrator would beavoided.
Required:
1-a. What is thefinancial advantage (disadvantage) of discontinuing theHousekeeping program?
1-b. Should theHousekeeping program be discontinued?
2-a. Prepare aproperly formatted segmented income statement.
2-b. Would a segmentedincome statement format be more useful to management in assessingthe long-run financial viability of the various services?
Jackson County Senior Services is a nonprofit organizationdevoted to providing essential services to seniors who live intheir own homes within the Jackson County area. Three services areprovided for seniorsâhome nursing, Meals On Wheels, andhousekeeping. Data on revenue and expenses for the past yearfollow:
| Total | Home Nursing | Meals On Wheels | House- keeping | |||||
| Revenues | $ | 919,000 | $ | 264,000 | $ | 402,000 | $ | 253,000 |
| Variable expenses | 468,000 | 114,000 | 199,000 | 155,000 | ||||
| Contribution margin | 451,000 | 150,000 | 203,000 | 98,000 | ||||
| Fixed expenses: | ||||||||
| Depreciation | 69,800 | 8,400 | 40,700 | 20,700 | ||||
| Liability insurance | 43,400 | 20,200 | 8,000 | 15,200 | ||||
| Program administratorsâ salaries | 116,000 | 40,400 | 38,800 | 36,800 | ||||
| General administrative overhead* | 183,800 | 52,800 | 80,400 | 50,600 | ||||
| Total fixed expenses | 413,000 | 121,800 | 167,900 | 123,300 | ||||
| Netoperating income (loss) | $ | 38,000 | $ | 28,200 | $ | 35,100 | $ | (25,300) |
| *Allocated onthe basis of program revenues. |
The head administrator of JacksonCounty Senior Services, Judith Miyama, is concerned about theorganizationâs finances and considers the net operating income of$38,000 last year to be too small. (Last yearâs results were verysimilar to the results for previous years and are representative ofwhat would be expected in the future.) Therefore, she has asked formore information about the financial advisability of discontinuingthe housekeeping program. |
The depreciation in housekeepingis for a van that transports housekeepers and their equipment fromjob to job. If the program were discontinued, the van would bedonated to a charitable organization. Depreciation charges assumezero salvage value. None of the general administrative overheadwould be avoided if the housekeeping program were dropped, but theliability insurance and the salary of the program administratorwould be avoided. |
| Required: |
| 1a. | What is the impact on net operating income by discontinuinghousekeeping program? (Input the amount as a positivevalue.) |
| (Click to select)DecreaseIncrease in net operatingincome by | $ |
| 1b. | Should thehousekeeping program be discontinued? | ||||
|
| 2. | Would a segmented income statement format be more useful tomanagement in assessing the long-run financial viability of thevarious services. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
