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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

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

$

922,000

$

270,000

$

400,000

$

252,000

Variable expenses

476,000

116,000

207,000

153,000

Contribution margin

446,000

154,000

193,000

99,000

Fixed expenses:

Depreciation

68,900

8,400

40,300

20,200

Liability insurance

43,600

20,700

7,500

15,400

Program administrators salaries

114,300

41,000

38,200

35,100

General administrative overhead*

184,400

54,000

80,000

50,400

Total fixed expenses

411,200

124,100

166,000

121,100

Net operating income (loss)

$

34,800

$

29,900

$

27,000

$

(22,100)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $34,800 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?

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