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

$

917,000

$

262,000

$

403,000

$

252,000

Variable expenses

475,000

110,000

208,000

157,000

Contribution margin

442,000

152,000

195,000

95,000

Fixed expenses:

Depreciation

68,800

8,600

40,100

20,100

Liability insurance

43,800

20,500

7,800

15,500

Program administrators salaries

114,500

40,500

38,500

35,500

General administrative overhead*

183,400

52,400

80,600

50,400

Total fixed expenses

410,500

122,000

167,000

121,500

Net operating income (loss)

$

31,500

$

30,000

$

28,000

$

(26,500)

Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $31,500 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. Should the Housekeeping program be discontinued?

yes/NO

2-a. 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

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