Accounting -Jackson County Senior Services is a nonprofit organization devoted

| January 30, 2017

Question
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:

Total

Home
Nursing

Meals On Wheels

House-
keeping

Revenues

$

917,000

$

266,000

$

401,000

$

250,000

Variable expenses

476,000

114,000

206,000

156,000

Contribution margin

441,000

152,000

195,000

94,000

Fixed expenses:

Depreciation

70,200

8,700

40,700

20,800

Liability insurance

43,500

20,300

7,900

15,300

Program administrators’ salaries

114,500

40,600

38,300

35,600

General administrative overhead*

183,400

53,200

80,200

50,000

Total fixed expenses

411,600

122,800

167,100

121,700

Net operating income (loss)

$

29,400

$

29,200

$

27,900

$

(27,700)

*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 $29,400 last year to be too small. (Last year’s results were very similar to the results for previous years and are representative of what would be expected in the future.) Therefore, she has asked for more information about the financial advisability of discontinuing the housekeeping program.

The depreciation in housekeeping is for a van that transports housekeepers and their equipment from job to job. If the program were discontinued, the van would be donated to a charitable organization. Depreciation charges assume zero salvage value. 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 impact on net operating income by discontinuing housekeeping program?(Input the amount as a positive value.)

in net operating income by

$

1b.

Should the housekeeping program be discontinued?

Yes

No

2.

Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services.

Yes

No

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