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	$	924,000	$	262,000	$	404,000	$	258,000
Variable expenses		481,000		117,000		206,000		158,000
Contribution margin		443,000		145,000		198,000		100,000
Fixed expenses:
Depreciation		69,100		8,600		40,400		20,100
Liability insurance		43,500		20,800		7,500		15,200
Program administrators salaries		114,900		40,100		39,000		35,800
General administrative overhead*		184,800		52,400		80,800		51,600
Total fixed expenses		412,300		121,900		167,700		122,700
Net operating income (loss)	$	30,700	$	23,100	$	30,300	$	(22,700)

*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 $30,700 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.

1-a.	What is the impact on net operating income by discontinuing housekeeping program? (Decreases should be indicated by a minus sign.)

1-b.

Should the housekeeping program be discontinued?

	Yes
	No

2-a.	Prepare a 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.

	Yes
	No

Difference: Net Operating Total If Current Total Housekeeping Income Increase Is Dropped or (Decrease) Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead Total fixed expenses Net operating income (loss) 0 S 0 S