Cumberland County Senior Services is a non$-$profit organization devoted to providing essential services to seniors who live in their

own homes within the Cumberland County area. Three services are provided for seniors$-$home nursing, Meals on Wheels, and

housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform

tests ordered by their physicians. The Meals on Wheels program delivers a hot meal once a day to each senior enrolled in the

program. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for

the past year follow:

$*$Allocated on the basis of program revenues.

The head administrator of Cumberland County Senior Services, Judith Ewa, is concerned about the organization's finances and

considers the operating income of $$6,000$ last year to be razor$-$thin. $($Last year's results were very similar to the results for previous

years and are representative of what would be expected in the future.$)$ She feels that the organization should be building its financial

reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ewa asked for more liability insurance and the salary of the program administrator would be avoided.

Required:

$1-$a$.$ Compute the change in net operating income for the company as a whole if housekeeping program be discontinued.

in net operating income by

$1-$b$.$ Should the housekeeping program be discontinued?

Yes

No

Would a segmented income statement format be more useful to management in assessing the long$-$run financial viability of the

various services? Cumberland County Senior Services is a non$-$profit organization devoted to providing essential services to seniors who live in their own homes within the Cumberland County area. Three services are provided for seniors$$home nursing, Meals on Wheels, and housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform tests ordered by their physicians. The Meals on Wheels program delivers a hot meal once a day to each senior enrolled in the program. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for the past year follow:

Total Home

Nursing Meals on

Wheels House$-$

keeping

Revenues $ $990,000$ $ $286,000$ $ $440,000$ $ $264,000$

Variable expenses $547,000134,000235,000178,000$

Contribution margin $443,000152,000205,00086,000$

Fixed expenses:

Depreciation $71,8008,80041,50021,500$

Liability insurance $45,70021,5008,00016,200$

Program administrators$$ salaries $121,50042,50039,50039,500$

General administrative overhead$*198,00057,20088,00052,800$

Total fixed expenses $437,000130,000177,000130,000$

Operating income $($loss$)$ $ $6,000$ $ $22,000$ $ $28,000$ $ $(44,000)$

$*$Allocated on the basis of program revenues.

The head administrator of Cumberland County Senior Services, Judith Ewa, is concerned about the organization$$s finances and considers the operating income of $$6,000$ last year to be razor$-$thin. $($Last year$$s results were very similar to the results for previous years and are representative of what would be expected in the future.$)$ She feels that the organization should be building its financial reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ewa asked for more information about the financial advisability of discontinuing the housekeeping program.

The depreciation in the housekeeping category 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. Depreciation charges assume zero salvage value. 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$.$ Compute the change in net operating income for the company as a whole if housekeeping program be discontinued.

$1-$b$.$ Should the housekeeping program be discontinued?

multiple choice $1$

Yes

No

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

multiple choice $2$

Yes

No