1319 Dropping or Retaining a Segment LO132 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 seniorshome nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow: Differential Analysis: The Key to Decision Making 609 Total Home Nursing Meals On Wheels Housekeeping Revenues $ 900,000 $ 260,000 $ 400,000 $ 240,000 Variable expenses 490,000 120,000 210,000 160,000 Contribution margin 410,000 140,000 190,000 80,000 Fixed expenses: Depreciation 68,000 8,000 40,000 20,000 Liability insurance 42,000 20,000 7,000 15,000 Program administrators salaries 115,000 40,000 38,000 37,000 General administrative overhead* 180,000 52,000 80,000 48,000 Total fixed expenses 405,000 120,000 165,000 120,000 Net operating income (loss) $ 5,000 $ 20,000 $ 25,000 $ (40,000) *Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $5,000 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? Should the Housekeeping program be discontinued? Explain. 2. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run financial viability of its various services