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 seniorshome 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 $ 1,044,000 $ 301,600 $ 464,000 $ 278,400 Variable expenses 581,200 142,400 250,000 188,800 Contribution margin 462,800 159,200 214,000 89,600 Fixed expenses: Depreciation 74,080 9,280 42,400 22,400 Liability insurance 47,920 22,400 8,600 16,920 Program administrators salaries 125,400 44,000 40,400 41,000 General administrative overhead* 208,800 60,320 92,800 55,680 Total fixed expenses 456,200 136,000 184,200 136,000 Operating income (loss) $ 6,600 $ 23,200 $ 29,800 $ (46,400 ) *Allocated on the basis of program revenues. The head administrator of Cumberland County Senior Services, Judith Ewa, is concerned about the organizations finances and considers the operating income of $6,600 last year to be razor-thin. (Last years 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