Question

Millbridge Ambulance Service has been consider-ing consolidating their three locations into just two locations. The location they are considering closing currently costs $ 155,000 to operate. If the location is closed, the ambulances from that location would be moved to the other two locations. The savings from the closure would be partially offset by increased expenses at the two remaining locations. Millbridge will lose $ 40,000 of state subsidy if they close the location. They only want to close the location if the closure results in an overall financial improvement. The current costs of the location are as follows:
Salaries of Staff .............$ 80,000
Rent .................20,000
Repairs and Maintenance ...........10,000
General and Administrative ..........20,000
Supplies .................25,000
Total ..................$155,000
The general and administrative expenses of $ 20,000 are an allocation of costs from the central office. The costs of the central office are not affected by the existence of the specific locations. If the location is closed, the staff would be transferred to the other two locations, and the lease will be canceled, so there will be no rent or repairs and maintenance. While they won’t purchase supplies for this location, the supply cost of the other two locations will rise by $ 20,000. What should Millbridge do?



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  • CreatedDecember 19, 2014
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