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	$	929,000	$	268,000	$	404,000	$	257,000
Variable expenses		470,000		117,000		200,000		153,000
Contribution margin		459,000		151,000		204,000		104,000
Fixed expenses:
Depreciation		69,500		8,300		40,900		20,300
Liability insurance		43,800		20,800		7,700		15,300
Program administrators salaries		115,700		41,000		38,400		36,300
General administrative overhead*		185,800		53,600		80,800		51,400
Total fixed expenses		414,800		123,700		167,800		123,300
Net operating income (loss)	$	44,200	$	27,300	$	36,200	$	(19,300)

*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 $44,200 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.)

		Total If	Difference: Net Operating
	Current Total	Housekeeping Is Dropped	Income Increase 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)

1-b.

Should the housekeeping program be discontinued?

Yes

No

2-a.

Prepare a segmented income statement.

	Home Nursing	Meals On Wheels	House keeping	Totals
Revenues
Variable expenses
Contribution margin
Traceable fixed expenses:
Depreciation
Liability insurance
Program administrators salaries
Total traceable fixed expenses
Program segment margins
General administrative overhead
Net operating income (loss)

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