Problem 12-19 Dropping or Retaining a Segment [LO12-2]

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:

		Total		Home Nursing		Meals On Wheels		House- keeping
Revenues	$	933,000	$	266,000	$	407,000	$	260,000
Variable expenses		471,000		114,000		199,000		158,000
Contribution margin		462,000		152,000		208,000		102,000
Fixed expenses:
Depreciation		69,600		8,500		40,400		20,700
Liability insurance		43,800		20,600		7,300		15,900
Program administrators’ salaries		114,300		40,900		38,200		35,200
General administrative overhead*		186,600		53,200		81,400		52,000
Total fixed expenses		414,300		123,200		167,300		123,800
Net operating income (loss)	$	47,700	$	28,800	$	40,700	$	(21,800)

*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 $47,700 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.

Required:

1. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program?

2. Prepare a properly formatted segmented income statement.

 

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List and define the three tiers of isolation to be followed for compliance with standard precautions.

 

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To complete this Module Project:

Prepare and submit a preliminary outline version (approximately 1,000 words) of what will eventually be your final Module Project report due in Week 7.

Your outline version this week should contain the following sections:

• Organisational Profile: what is the name of the organisation you propose to use, where is it located, what is its primary business and approximately how many staff does it employ? (If there are any concerns about any aspect of commercial sensitivity, it is permissible to use an assumed name for the organisation you select).
• Organisational Structure: how are human and other resources arranged within this organisation, what levels of seniority exist and how are those levels of seniority connected through formal reporting lines? (A structure diagram would be useful here.) To what extent is the decision process centralised in the senior management team, and to what extent is it devolved to lower levels in the organisation?
• Change Drivers: to what extent does this organisation currently align with the principle of punctuated equilibrium? What are the factors in either or both of the external or internal operating environments that suggest a significant element of change is needed to the way in which this organisation works? Each change driver you identify should be categorised according to the criteria presented in relation to the Week 2 Deseret News case.
• Key Stakeholders: who are the individuals, groups and organisations who will be most directly affected by the type of change that is indicated by change driver analysis? To what extent do you expect each stakeholder’s reaction to be positive or negative? What are the primary ‘unanswered questions’ that you expect to receive?
• Change Initiative Overview: what is the primary aim of the change initiative that you recommend be introduced, and how could this initiative be classified in terms of the parameters suggested by Nasim & Sushil? How will success or failure in this initiative be measured? What ethical considerations need to be taken into account as the initiative is designed?

 

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What are the distinguishing characteristics between a public charity and a private foundation? What is a public support test and how does it relate to public charities and private foundations?

 

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