Should the housekeeping program be discontinued? Explain. Show computations to support your answer.
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. 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 housecleaning and
maintenance services. Data on revenue and expenses for the past
The head administrator of Jackson County Senior Services, Judith
Miyama, is concerned about the organization’s finances and
considers the net operating income of $5,000 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.
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.
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