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	$ 926,000	$ 262,000	$ 407,000	$ 257,000
Variable expenses	473,000	116,000	198,000	159,000
Contribution margin	453,000	146,000	209,000	98,000
Fixed expenses:
Depreciation	69,700	8,600	40,500	20,600
Liability insurance	44,500	21,000	7,800	15,700
Program administrators salaries	114,900	40,900	38,700	35,300
General administrative overhead*	185,200	52,400	81,400	51,400
Total fixed expenses	414,300	122,900	168,400	123,000
Net operating income (loss)	$ 38,700	$ 23,100	$ 40,600	$ (25,000)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $38,700 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 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?

Req 1A

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

Financial (disadvantage)

Req 2A

Prepare a properly formatted segmented income statement.

	Total	Home Nursing	Meals On Wheels	House-keeping
Revenues
Variable expenses
Contribution margin	0	0	0	0
Traceable fixed expenses:
Depreciation
Liability insurance
Program administrators salaries
Total traceable fixed expenses	0	0	0	0
Program segment margins	0	$0	$0	$0
General administrative overhead
Net operating income (loss)	0