ABC 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:

		Total		Home Nursing		Meals On Wheels		House- keeping
Revenues	$	928,000	$	266,000	$	408,000	$	254,000
Variable expenses		455,000		111,000		194,000		150,000
Contribution margin		473,000		155,000		214,000		104,000
Fixed expenses:
Depreciation		69,400		8,500		40,100		20,800
Liability insurance		44,400		20,900		7,600		15,900
Program administrators salaries		115,100		40,400		38,300		36,400
General administrative overhead*		185,600		53,200		81,600		50,800
Total fixed expenses		414,500		123,000		167,600		123,900
Net operating income (loss)	$	58,500	$	32,000	$	46,400	$	(19,900)

*Allocated on the basis of program revenues.

The head administrator of ABC Services, considers last years net operating income of $58,500 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-a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program?

1-b. Based on the financial advantage (disadvantage) of discontinuing the Housekeeping program calculated in requirement Req 1A, should the Housekeeping program be discontinued?

2-a. Prepare a properly formatted segmented income statement.

2-b. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services?

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