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	$	926,000	$	269,000	$	404,000	$	253,000
Variable expenses		470,000		110,000		208,000		152,000
Contribution margin		456,000		159,000		196,000		101,000
Fixed expenses:
Depreciation		69,300		8,200		40,300		20,800
Liability insurance		44,100		20,500		7,800		15,800
Program administrators salaries		114,200		40,000		38,800		35,400
General administrative overhead*		185,200		53,800		80,800		50,600
Total fixed expenses		412,800		122,500		167,700		122,600
Net operating income (loss)	$	43,200	$	36,500	$	28,300	$	(21,600)

*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 $43,200 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?
	Total if House- Difference: Net Operating Current Total Keeping is dropped Income Increase or (decrease) Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrator's salaries General administrative overhead Total fixed expenses Net operating income (loss)

1b.	Should the housekeeping program be discontinued?
	Yes No

2a.	Prepare a segmented income statement.
	Home Meals on House Totals Nursing Wheels 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)

2b.	Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services.
	Yes No