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 seniors—home 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	$ 268,000	$ 407,000	$ 257,000
Variable expenses	466,000	114,000	195,000	157,000
Contribution margin	466,000	154,000	212,000	100,000
Fixed expenses:
Depreciation	69,600	9,000	40,200	20,400
Liability insurance	44,400	20,900	7,800	15,700
Program administrators’ salaries	115,400	40,900	38,000	36,500
General administrative overhead*	186,400	53,600	81,400	51,400
Total fixed expenses	415,800	124,400	167,400	124,000
Net operating income (loss)	$ 50,200	$ 29,600	$ 44,600	$ (24,000)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, considers last year’s net operating income of $50,200 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?

 

Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? < Req 1A Req 1B >