ackson 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:

Total Home Nursing Meals On Wheels House-keeping

Revenues $ 927,000 $ 264,000 $ 406,000 $ 257,000

Variable expenses 460,000 119,000 190,000 151,000

Contribution margin 467,000 145,000 216,000 106,000

Fixed expenses: Depreciation 70,300 9,000 40,500 20,800

Liability insurance 43,300 20,700 7,500 15,100

Program administrators salaries 115,000 40,500 38,200 36,300

General administrative overhead* 185,400 52,800 81,200 51,400

Total fixed expenses 414,000 123,000 167,400 123,600

Net operating income (loss) $ 53,000 $ 22,000 $ 48,600 $ (17,600)

*Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $53,000 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-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?