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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 $ 932,000 $ 266,000 $ 407,000 $ 259,000
Variable expenses 473,000 117,000 199,000 157,000
Contribution margin 459,000 149,000 208,000 102,000
Fixed expenses:
Depreciation 69,800 9,000 40,300 20,500
Liability insurance 42,900 20,100 7,700 15,100
Program administrators salaries 114,400 40,400 38,400 35,600
General administrative overhead* 186,400 53,200 81,400 51,800
Total fixed expenses 413,500 122,700 167,800 123,000
Net operating income (loss) $ 45,500 $ 26,300 $ 40,200 $ (21,000)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $45,500 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. 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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