10 3 Problem 13-19 (Algo) Dropping or Retaining a Segment (LO13-2] Jackson County Senior Services is...

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10 3 Problem 13-19 (Algo) Dropping or Retaining a Segment (LO13-2] 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 Revenues Variable expenses Contribution margin Liability insurance Meals De Wheels $400,000 House keeping $ 259,00 150,0 100,000 Total $ 934,000 471,000 46,000 Nursing $267,00 119,000 148,000 193,000 215,600 Fixed expenses Depreciation 70,400 40,700 20,900 43,000 20,300 7,200 15,500 Program administrators' salaries 114,000 40,100 General administrative overhead 38,500 35,480 186,000 53,400 1,500 51,000 Total fixed expenses 414,240 127K48) 173 Kee Net operating incose (loss) $40,000 25,400 547,000 (23,600) Allocated on the basis of program revenues The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $48.800 10 be unsatisfactory, therefore, she is considering the possibility of 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 1a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? 16. Based on the financial advantage (disadvantage) of discontinuing the Housekeeping program calculated in requirement Req 1A, should the Housekeeping program be discontinued? 2a. Prepare a propeny formatted segmented income statement 2.b. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services? 10 3 Problem 13-19 (Algo) Dropping or Retaining a Segment (LO13-2] 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 Revenues Variable expenses Contribution margin Liability insurance Meals De Wheels $400,000 House keeping $ 259,00 150,0 100,000 Total $ 934,000 471,000 46,000 Nursing $267,00 119,000 148,000 193,000 215,600 Fixed expenses Depreciation 70,400 40,700 20,900 43,000 20,300 7,200 15,500 Program administrators' salaries 114,000 40,100 General administrative overhead 38,500 35,480 186,000 53,400 1,500 51,000 Total fixed expenses 414,240 127K48) 173 Kee Net operating incose (loss) $40,000 25,400 547,000 (23,600) Allocated on the basis of program revenues The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $48.800 10 be unsatisfactory, therefore, she is considering the possibility of 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 1a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? 16. Based on the financial advantage (disadvantage) of discontinuing the Housekeeping program calculated in requirement Req 1A, should the Housekeeping program be discontinued? 2a. Prepare a propeny formatted segmented income statement 2.b. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services?