Elder Services is a not-for-profi t 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. Elder Services relies on client fees and a small grant from the region to provide services. Following are the results from last year's operations:

In the past, the region 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 region 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.
REQUIRED
A. What is the contribution margin per visit for each department?
Consider the following 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 that no alternative uses are planned for the health services building and no change would occur in headquarters costs. Estimate the surplus (deficit) if the health services department is closed.
C. What would be the estimated total surplus (deficit) if cleaning services increase by 2,000 clients, assuming no changes in fixed costs?
D. What would be the estimated total surplus (deficit) 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 region this year. Ignore Parts B, C, and D and answer the following questions as part of your analysis.
E. Which type of non routine operating decision does Elder Services need to make? What are the managers' decision options?
F. Perform quantitative analyses to help 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 risks about Elder Services' ability to achieve the quantitative results for each option, B, C, and D. List as many risks as you can.
H. List 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 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 to do.

Total Departments Visits Revenues Variable cost (labour and supplies) Fixed overhead costs Transportation Meals Cleaning 10,000 Health 30,000 $50,000 $100,000 $150.000 $300.000 200,000 22,000 10,000 10,000 30,000 50,000 8,000 120,000 10,000 4,000 $4,000 fixed+$5,000 variable) ($10,000 fixed $2,000 variable) $5,000 variable* 9,000 9,000 12,000 5,000 30,000 60,000 308,000 $(3.000) 10.000 (5.000) (8.000) 12,000 5,000 Headquarter costs allocated (based on revenues) Total expenses Surplus (deficit) 10,000 20,000 53,000 90,000 165,000 Nurses use their own cars