Exercise 12-2 Dropping or Retaining a Segment [LO2] 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 senlors-home nursing. Meals on Wheets, and housekeeping. In the home nursing program, nurses visit senlors on a regular basis to check on their general health and to perform tests ordered by their physicians. The Meals on Wheels program dellvers 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 concemed about the organization's finances and considers the operating income of $5,500 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 bullding 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 von 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 orgonization. Depreciation charges assume zero salvage value. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the llability insurance and the salary of the program administrator would be avoided. Roquired: 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? Yes No 2. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the varlous services? Yes No