HouseaKeep1ng Total Home Nursing wheels Revenues $ 939,999 $ 299,999 $ 499,999 $ 252,999 Variable expenses 476,888 11?,999 293,966 156,966 Contribution margin 454,888 152,999 296,988 96,998 Fixed expenses: Depreciation 69,888 9,999 49,299 26,668 Liability insurance 43,288 29,299 7,566 15,596 Program administrators' salaries 116,388 49,696 38,888 36,998 General administrative overhead* 186,888 53,699 81,866 59,496 Total Fixed expenses 415,388 123,696 168,388 123,488 Net operating income (loss) $ 38,788 $ 28,&96 $ 37,766 $ (27,499) \"Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $38,700 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 ofthe general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary ofthe program administrator would be avoided. Required: 1a. What is the financial advantage (disadvantage) ofdiscontinuing the Housekeeping program? 1b. Based on the financial advantage (disadvantage) of discontinuing the Housekeeping program calculated in requirement Red 1A. should the Housekeeping program be discontinued? 2a. Prepare a properly formatted segmented income statement. 2b. Would a segmented income statement format be more useful to management in assessing the longrun financial viability ofthe various services? The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses forthe past quarter follow: Mountain Total Dirt Bikes Bikes Racing Bikes Sales $ 927,999 $ 262,666 $5 499,999 $ 256,666 Variable manufacturing and selling expenses 479,666 118,666 263,666 156,666 Contribution margin 448,666 144,666 266,666 98,666 Fixed expenses: Advertising, traceable 76,666 8,866 46,866 26,466 Depreciation of special equipment 43,866 21,666 7,566 15,366 Salaries of productsline managers 115,566 46,166 38,566 36,966 Allocated common Fixed expenses* 185,466 52,466 81,866 51,266 Total 'Fixed expenses 414,766 122,366 168,666 123,866 Net operating income (loss) $ 33,366 $ 21,766 $ 37,466 $ (25, 866) 'Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the longrun profitability of the various product lines