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	$	919,000	$	264,000	$	402,000	$	253,000
Variable expenses		466,000		111,000		200,000		155,000
Contribution margin		453,000		153,000		202,000		98,000
Fixed expenses:
Depreciation		70,200		8,700		40,500		21,000
Liability insurance		43,400		20,300		7,200		15,900
Program administrators salaries		115,000		40,400		38,900		35,700
General administrative overhead*		183,800		52,800		80,400		50,600
Total fixed expenses		412,400		122,200		167,000		123,200
Net operating income (loss)	$	40,600	$	30,800	$	35,000	$	(25,200)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $40,600 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.

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

What is the financial advantage (disadvantage) of discontinuing the Housekeeping program?

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

Yesradio button unchecked1 of 2

No

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)

• Req 1B
• Req 2B

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

	Yesradio button unchecked1 of 2 No