MetroPCS ezto.mheducation.com Jackson County Senior Services is a nonprofit orga
ID: 2582168 • Letter: M
Question
MetroPCS ezto.mheducation.com 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 Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services Judith Miyama, is concerned about the organization's finances and considers the net operating income of $43,300 last year to be razor-thin. (Last year's results were very similar to the results for previous years and are representative of what would be expected in the future.) She feels that the organization should be building its financial reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ms. Miyama asked for more information about the financial advisability of perhaps 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. What is the impact on net operating income by discontinuingExplanation / Answer
1a.
1b No house keeping should not be discontinued
2a.
2b. Yes segmented income statement format would be more useful.
total if Current total Houskeeping is dropped increase or decrease Revenue 927000 668000 -259000 variable expenses 471000 318000 -153000 Contribution margin 456000 350000 -106000 Fixed expenses Depreciation 69300 48700 -20600 Liability insurance 43200 27700 -15500 program administrators salary 114800 79000 -35800 general admn. Overhead 185400 185400 0 Total fixed expense 412700 340800 -71900 net operating income 43300 9200 -34100