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Cost Accounting for ABC Home Health Agency

The financial results of ABC Home Health Agency for the current year are summarized below for each of its four divisions {see attachment}. Unavoidable headquarters' costs of $1,240,000 included in the total costs have been distributed to the divisions on the basis of revenue. The remaining portion of the total $6,126,000 of costs have been incurred at the divisional level and can be avoided if a division is closed.

Which division(s) of the ABC Home Health Agency, if any, should be shut down due to failure to cover divisional costs? Please show your work.

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The financial results of ABC Home Health Agency for the current year are summarized below for each of its four divisions. Unavoidable headquarters' costs of $1,240,000 included in the total costs have been distributed to the divisions on the basis of revenue. The remaining portion of the total $6,126,000 of costs have been incurred at the divisional level and can be avoided if a division is closed.

ABC Home Health Agency Operating Results
for the Year Ended December 9, 1997 (000s omitted)

Divisions
Total North South East West
Revenue 6,590 990 2,640 980 1,980
Total ...

Solution Summary

The expert examines cost accounting for ABC Home Health Agency. The basic revenues for divisions are given.

$2.19