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Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Jackson County

Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Jackson County area. Three services are provided for seniorshome nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow:

Total Home Nursing Meals On Wheels House-keeping
Revenues $ 922,000 $ 263,000 $ 403,000 $ 256,000
Variable expenses 470,000 117,000 199,000 154,000
Contribution margin 452,000 146,000 204,000 102,000
Fixed expenses:
Depreciation 70,200 8,400 41,000 20,800
Liability insurance 44,400 21,000 7,400 16,000
Program administrators salaries 114,800 40,000 38,900 35,900
General administrative overhead* 184,400 52,600 80,600 51,200
Total fixed expenses 413,800 122,000 167,900 123,900
Net operating income (loss) $ 38,200 $ 24,000 $ 36,100 $ (21,900)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $38,200 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 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. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program?

1-b. Based on the financial advantage (disadvantage) of discontinuing the Housekeeping program calculated in requirement Req 1A, should the Housekeeping program be discontinued?

2-a. Prepare a properly formatted segmented income statement.

Prepare a properly formatted segmented income statement.

Total Home Nursing Meals On Wheels House-keeping
Revenues
Variable expenses
Contribution margin
Traceable fixed expenses:
Depreciation
Liability insurance
Program administrators salaries
Total traceable fixed expenses
Program segment margins
General administrative overhead
Net operating income (loss)

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

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