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: Meals On House- Total Nursing Wheels keeping $928,000 $ 269,000 406,000 $ 253,000 157,000 96,000 Home Revenues Variable expenses Contribution margin Fixed expenses: 472,000 114,000 201,000 456,000 155,000 205, 000 Depreciation Liability insurance Program administrators' salaries General administrative overhead* 20,100 15,100 35,700 50,600 121,500 $ 43,200 31,200 $ 37,500 $(25,500) 40,300 7,300 38,700 81,200 412,800 123,800 167,500 69,300 43,000 114,900 185,600 8,900 20,600 40,500 53,800 Total fixed expenses Net operating income (loss) 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 $43,200 to 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

Answer 1

Incremental Analysis
				TOTAL	Discontinue	Net Increase/(Decrease)
				AMOUNT $	AMOUNT $	AMOUNT $
Sales Revenue				928,000	675,000	-253,000
Less: Variable cost				472,000	315,000	157,000
Contribution margin				456,000	360,000	-96,000
Less: Fixed cost
Deprecication				69,300	69,300	0
Liability Insurance				43,000	27,900	15,100
Program admin salaries				114,900	79,200	35,700
General admin expenses				185,600	185,600	0
SEGMENT MARGIN				43,200	-2,000	-45,200
No, House Keeping Division Shall not be Discontinued
SEGMENT-WISE INCOME STATEMENT
				TOTAL	Home Nursing	Meal on wheel	House keeping
				AMOUNT $	AMOUNT $	AMOUNT $	AMOUNT $
Sales Revenue				928,000	269,000	406,000	253,000
Less: Variable cost				472,000	114,000	201,000	157,000
Contribution margin				456,000	155,000	205,000	96,000
Less: Traceable Expense
Depreciation				69,300	8,900	40,300	20,100
Liability insurance				43,000	20,600	7,300	15,100
Program admin salaries				114,900	40,500	38,700	35,700
Total Traecable expense				227,200	70,000	86,300	70,900
SEGMENT MARGIN				228,800	85,000	118,700	25,100
Less: Common Fixed expesne				185,600
Net Operating Income				43,200
Yes, it will be more beneficial