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	$	920,000	$	262,000	$	404,000	$	254,000
Variable expenses		465,000		111,000		200,000		154,000
Contribution margin		455,000		151,000		204,000		100,000
Fixed expenses:
Depreciation		69,900		8,800		40,200		20,900
Liability insurance		44,300		20,700		7,700		15,900
Program administrators salaries		115,900		40,700		38,200		37,000
General administrative overhead*		184,000		52,400		80,800		50,800
Total fixed expenses		414,100		122,600		166,900		124,600
Net operating income (loss)	$	40,900	$	28,400	$	37,100	$	(24,600)

*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 $40,900 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?

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

Required 1-a. What is the impact on net operating income by discontinuing housekeeping program? Total If Income Current Total ariable expenses Contribution margin Fixed expenses: 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. als On Totals Revenues Variable expenses Contribution margin Traceable fixed expenses: Liability insurance Program administrators' salaries Total traceable fixed expenses Program segment margins General administrative overhead Net operating income (loss)