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

$

927,000

$

270,000

$

404,000

$

253,000

Variable expenses

473,000

114,000

206,000

153,000

Contribution margin

454,000

156,000

198,000

100,000

Fixed expenses:

Depreciation

69,400

8,200

40,700

20,500

Liability insurance

44,000

21,000

7,300

15,700

Program administrators salaries

114,500

40,000

38,600

35,900

General administrative overhead*

185,400

54,000

80,800

50,600

Total fixed expenses

413,300

123,200

167,400

122,700

Net operating income (loss)

$

40,700

$

32,800

$

30,600

$

(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 $40,700 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.

Required:

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