Customer Service Chat
Get quote & make Payment
add or drop analysis, Financial Management
Add or Drop Analysis
Lakespring Retirement Village is home to senior citizens who are fairly independent but need assistance with basic health care and occasional meals. Jill Thompson, a licensed beautician, works on salary 16 hours a week at Lakespring. Funds at the retirement village have been getting tight due to an increase in the number of Medicaid and other low income residents. Carl Jones, Lakespring’s administrator, told Thompson that the hair salon might have to be closed. Jones is sympathetic because he knows that it will be inconvenient for many residents to get this service elsewhere, and Thompson’s charges are about all the residents can afford, but he wonders how he can keep any unit open that does not break even. Jones is looking for a way to save the hair salon and has provided the following information:
Hair Cuts Permanents Brief Visits
Charge per resident $10.00 $20.00 $5.00
Variable cost per service performed
Cleaning/styling/setting products $1.00 $4.00 $3.50
Variable water expense $0.15 $0.25 $0.25
Laundry expenses for towels, smocks etc. $0.10 $0.30 $0.30
Jill is currently doing an average weekly business of 16 hair cuts, 7 permanents, and 4 brief visits, which take half an hour, an hour, and fifteen minutes, respectively. The hair salon is currently allocated rent of $250 per month and other upkeep expenses of $50 a month. Thompson is paid $12 per hour, and she earned $768 last month.
a. Prepare a monthly income statement and determine the total contribution margin and product margin for each service line. Determine net income for the service taken as a whole.
b. How would you advise Jones: should he close the hair salon? Why or why not?
c. Should Jones try to persuade Thompson to drop any service she now offers?
The 75 residents of Lakespring currently spend on average $20 a month each for regular health care services at a local clinic. This expense is subsidized by the retirement village. Jones believes that if the salon is closed, the vacated space may be used to hire a physician to provide these services on site on a contractual basis for 9 months at a time. Chelsea Walden, the physician he is considering for this job, estimates that her fixed cost in providing this service will be $1,000 and she will also incur a cost of $12 per patient per month on a 9-month basis to cover the 75 residents. If she wants to earn $3,000 in profit for the 9-month period and Jones would like to pay her on a per resident per month basis, what would her price be?
d. Given Walden’s price and the corresponding monthly cost to Lakespring, would it be financially beneficial for Jones to shut down the salon and start the clinic, or is the current arrangement a better deal?
e. What decision should Jones make? Provide justifications.
Posted Date: 11/28/2012 6:38:28 PM | Location : United States
Ask an Expert
add or drop analysis, Assignment Help, Ask Question on add or drop analysis, Get Answer, Expert's Help, add or drop analysis Discussions
Write discussion on add or drop analysis
Your posts are moderated
Write your message here..
Discount rate, #quA stock has a current dividend of $0.32 with a growth rat...
#quA stock has a current dividend of $0.32 with a growth rate of 8% annually. Assuming a 10% annual discount rate, what should the price of the stock be one year from today? Answer
Calculate the nwc , Suppose you can decrease the cash on hand and the compa...
Suppose you can decrease the cash on hand and the company will require holding Net Working Capital (including cash) equal to 4% of the next year's sales going forward. This will r
Financial management and materials department, Financial Management and Mat...
Financial Management and Materials Department The materials management is of utmost importance in a manufacturing firm and covers the areas such as procurement, storage, mainte
Calculate expected gain or loss from the forward hedging, 1. A company sold...
1. A company sold a super computer to an Institute in Germany on credit and invoiced DM 10 million payable in six months. Presently, the six-month forward exchange rate is $1.50/DM
Explain about changing debt, Is it possible to use a constant WACC in the v...
Is it possible to use a constant WACC in the valuation of a company with a changing debt? Theoretically, the WACC can only be constant if a constant debt is expected. If the de
Financial statements for a company, The following is incomplete financial s...
The following is incomplete financial statements for XYZ, Inc.: XYZ, Inc.
Restrictions on investments, Restrictions on Investments: A mutual fund...
Restrictions on Investments: A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment
OPERATING CYCLE, DISSCUSS THE APPLICABILITY OF AN OPERATING CYCLE IN A VEGE...
DISSCUSS THE APPLICABILITY OF AN OPERATING CYCLE IN A VEGETABLE GROWING BUSINESS IN UGANDA?
What is risk aversion, What is risk aversion? If common stockholders are ri...
What is risk aversion? If common stockholders are risk averse, how do you explain the fact that they often invest in very risky companies? Risk aversion is the tendency to evad
Cash flow valuation technique, Cash Flow Valuation Technique The aim o...
Cash Flow Valuation Technique The aim of this research is to empirically enquire into how to value a company using discounted cash flow valuation technique within its real lif
Accounting Assignment Help
Economics Assignment Help
Finance Assignment Help
Statistics Assignment Help
Physics Assignment Help
Chemistry Assignment Help
Math Assignment Help
Biology Assignment Help
English Assignment Help
Management Assignment Help
Engineering Assignment Help
Programming Assignment Help
Computer Science Assignment Help
Why Us ?
~24x7 hrs Support
~Quality of Work
~Time on Delivery
~Privacy of Work
Human Resource Management
Literature Review Writing Help
Follow Us |
T & C
Copyright by ExpertsMind IT Educational Pvt. Ltd.