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 seniors-home nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow: Revenues Variable expenses Home Meals On House- Total Nursing Wheels keeping $ 917,000 $262,000 $402,000 $253,000 481,000 112,000 210,000 159,000 Contribution margin 436,000 150,000 192,000 94,000 Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead 69,900 42,800 114,700 8,800 20,300 40,400 40,600 7,200 38,100 20,500 15,300 36,200 183,400 52,400 80,400 50,600 Total fixed expenses 410,800 121,900 166,300 122,600 Net operating income (loss) $ 25,200 $ 28,100 $ 25,700 $ (28,600) 'Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organization's finances and considers the net operating income of $25,200 last year to be razor-thin. (Last year's 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 perhaps 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. ok nt ances Required: 1-a. What is the impact on net operating income by discontinuing housekeeping program? Difference: Net Total If Operating Housekeeping Income Increase Is Dropped or (Decrease) Current Total Revenues 0 0 0 Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead Total fixed expenses Net operating income (loss) 0 0 0 $ 0 $ 0 $ 0 1-b. Should the housekeeping program be discontinued? O Yes O No 2-a. Prepare a segmented income statement. Home Nursing Meals On Wheels House keeping Totals 0 0 0 0 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) 0 0 0 $ 0 $ 0 $ 0 0 $ 2-6. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services. Yes ONo
