Question

Adams County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Adams County area. Three services are provided for seniors-home nursing, meals on wheels, and housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform tests ordered by their physicians. The meals on wheels program delivers a hot meal once a day to each senior enrolled in the program. The housekeeping service provides weekly housekeeping and maintenance services. Data on revenue and expenses for the past year follow:
Home Nursing Meals On Wheels House- keeping Total $900,000 490,000 410,000 $260,000 120.000 140,000 $400,000 210,000 190,000 $240,000 160,000 80,000 Revenues ..... Variable expenses ............ Contribution margin ..... Fixed expenses: Depreciation ..... Liability insurance....... .. Program administrators' salaries ... General administrative overhead" ...... Total fixed expenses ........ ...... Net operating income (loss) ............. "Allocated on the basis of program revenues. 68,000 42,000 115,000 180.000 8,000 20,000 40.000 52.000 40,000 7,000 38,000 80,000 165,000 $ 25,000 20.000 15,000 37,000 48,000 120,000 $140,000 405,000 $ 5,000 120,000 $ 20,000 The head administrator of Adams County Senior Services, Mariam Santoya, is concerned about the organizations finances and considers the net operating income of $12,000 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. Santoya 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.

Required:
1. Should the housekeeping program be discontinued? Explain. Show computations to support your answer.
2. Recast the above data in a format that would be more useful to management in assessing the long run financial viability of the various services.

Answer 1

Explain this better plz