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	$	925,000	$	262,000	$	405,000	$	258,000
Variable expenses		482,000		115,000		209,000		158,000
Contribution margin		443,000		147,000		196,000		100,000
Fixed expenses:
Depreciation		69,100		8,300		40,400		20,400
Liability insurance		43,400		20,700		7,300		15,400
Program administrators salaries		115,900		40,400		38,600		36,900
General administrative overhead*		185,000		52,400		81,000		51,600
Total fixed expenses		413,400		121,800		167,300		124,300
Net operating income (loss)	$	29,600	$	25,200	$	28,700	$	(24,300)

*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 $29,600 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.

1-a.	What is the impact on net operating income by discontinuing housekeeping program?

Total If	Difference: Net Operating
	Current Total	Housekeeping Is Dropped	Income Increase or (Decrease)
Revenues
Variable expenses
Contribution margin	0	0	0
Fixed expenses:
Depreciation
Liability insurance
Program administrators salaries
General administrative overhead
Total fixed expenses	0	0	0
Net operating income (loss)

1-b. Should the housekeeping program be discontinued?

2-a.	Prepare a segmented income statement.

Home Nursing	Meals On Wheels	House keeping	Totals
Revenues
Variable expenses
Contribution margin	0	0	0	0
Traceable fixed expenses:
Depreciation
Liability insurance
Program administrators salaries
Total traceable fixed expenses	0	0	0	0
Program segment margins	$0	$0	$0	0
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.