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: Home Nursing $ 278, 200 129,800 Total $963,000 529,900 Meals on Wheels $ 428,000 227,500 House- keeping $ 256,800 172,600 Revenues Variable expenses Contribution margin 433,100 148,400 200, 500 84,200 Fixed expenses : Depreciation Liability insurance Program administrators' salaries General administrative overhead 70,660 44,590 119,550 192,600 8,560 21,050 41,750 55,640 41,050 7,700 39,050 85,600 21,050 15,840 38,750 51,360 Total fixed expenses 427, 400 127,000 173,400 127,000 Operating income (loss) $ 5,700 $ 21,400 $ 27,100 $ (42,800) *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 $5,700 last year to be razor-thin. (Last year's results were very similar to the results for previous years and are representativ what would expected future.) She feels the organization should be building its fina 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. Answer is complete but not entirely correct. Decrease in net operating income by $ 25,350 1-b. Should the housekeeping program be discontinued? 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? Yes