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. 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	$	935,000	$	270,000	$	410,000	$	255,000
Variable expenses		468,000		117,000		193,000		158,000
Contribution margin		467,000		153,000		217,000		97,000
Fixed expenses:
Depreciation		69,200		8,100		40,100		21,000
Liability insurance		43,200		20,600		7,300		15,300
Program administrators salaries		115,400		40,600		38,400		36,400
General administrative overhead*		187,000		54,000		82,000		51,000
Total fixed expenses		414,800		123,300		167,800		123,700
Net operating income (loss)	$	52,200	$	29,700	$	49,200	$	(26,700)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organizations finances and considers the net operating income of $52,200 last year to be too small. (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, Ms. Miyama asked for more information about the financial advisability 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. 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:

1a.	What is the impact on net operating income by discontinuing housekeeping program? (Input the amount as a positive value. Omit the "$" sign in your response.)

(Click to select)IncreaseDecrease in net operating income by

$

1b.

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
	No