Elder Services is a not-for-profit organization that has three departments in three separate locations, in addition to the headquarters. The organization provides services for elderly clients who are still living at home. One department provides meals, one department provides cleaning services, and one department provides health-care services. Elderly Services relies on client fees and a small grant from the county to provide services.
Following are the results from last year’s operations.

In the past, the county provided small grants each year to cover losses for Elder Services.
However, due to an economic downturn and decreased tax funds in the current year, the county will not be able to provide any support next year. In light of these changes, the managers of Elder
Services are trying to decide how to balance the budget.

A. What is the contribution margin per visit for each department?
Consider the next three situations independently.
B. To eliminate losses, the director of Elder Services would like to close the department that provides health services for clients. Assume no alternative uses are planned for the health services building and no change would occur in headquarters costs. Estimate the total surplus (deficit) if the health services department is closed.
C. What would the estimated total surplus (deficit) be if cleaning services increase by 2,000 visits, assuming no changes in fixed costs?
D. What would the estimated total surplus (deficit) be if Elder closes the meals division and that space is leased to another organization for $2,000 per month?
Suppose you are hired to help Elder’s managers decide what to do about the lack of funding from the county this year. Ignore parts (B), (C), and (D) and answer the following questions as part of your analysis.
E. Which type of decision does Elder Services need to make? What are the managers’ decision options?
F. Perform quantitative analyses to help you decide whether one or more of the options listed in parts (B), (C), and (D) would be beneficial to the finances of Elder Services.
G. Now assume that the options in parts (B), (C), and (D) are available. List uncertainties about Elder Services’ ability to achieve the quantitative results for each option: (B), (C), and (D). List as many uncertainties as you can.
H. List risks and other qualitative factors that the managers of Elder Services need to consider in making this decision. List as many factors as you can.
I. As a consultant to Elder Services, how might you go about acquiring qualitative information?
J. Suppose you decide to interview Elder Services employees to help you gather qualitative information. Identify possible reasons that information you obtain from employees might be biased. List as many reasons as you can.
K. Describe possible trade-offs the managers of Elder Services might need to make in deciding what todo.

  • CreatedJanuary 26, 2015
  • Files Included
Post your question