User Account

All Pages

Add or Drop Analysis, Financial Management

Assignment Help:
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.

Related Discussions:- Add or Drop Analysis

The financial services authority in the united kingdom, The Financial Servi...

The Financial Services Authority in the United Kingdom: The Financial Services Authority (FSA) in the United Kingdom (UK) is the financial watchdog. It is a company limited by

Portfolio management and asset pricing, I am facing some problems in my ass...

I am facing some problems in my assignment of Portfolio Management. Can anybody suggest me the proper explanation for it?

Management of finacial institutions, what are the features of a comprehensi...

what are the features of a comprehensive interest rate risk management programme

Explain risk adjusted discount rate method, Q. Explain Risk Adjusted Discou...

Q. Explain Risk Adjusted Discount Rate Method? In the risk adjusted discount rate method the future cash flow from capital projects are discount at the hazard adjusted discount

Case study on labour standars, describe the impact of different types of st...

describe the impact of different types of standards on motivation, and specifically , the likely effects on motivation of adopting the labor standards recommended for geeta & compa

Evaluation and assessing probability of management risk, Evaluation: On...

Evaluation: Once all the possible events are identified, the next step in the risk management process is to evaluate the events. As stated previously, the evaluation process wo

Scope of finance function, SCOPE OF FINANCE FUNCTION In several busine...

SCOPE OF FINANCE FUNCTION In several businesses, based on the complexity and size of financial decision-making, the scope of finance function may be categorized into incidenta

Compute the expected return and standard deviation, Question: Consider ...

Question: Consider the following information:   Stock A Stock B Beta 0.8 1.4 Share price, $

What is translation risk, Q. What is Translation risk? This risk occurs...

Q. What is Translation risk? This risk occurs on consolidation of financial statements prior to reporting financial results and for this reason is as well known as accounting e

Clientele effect, what is clientele effect?

what is clientele effect?

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd