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	$	921,000	$	262,000	$	406,000	$	253,000
Variable expenses		484,000		117,000		208,000		159,000
Contribution margin		437,000		145,000		198,000		94,000
Fixed expenses:
Depreciation		69,500		8,700		40,400		20,400
Liability insurance		43,600		20,500		7,900		15,200
Program administrators salaries		114,700		40,300		38,800		35,600
General administrative overhead*		184,200		52,400		81,200		50,600
Total fixed expenses		412,000		121,900		168,300		121,800
Net operating income (loss)	$	25,000	$	23,100	$	29,700	$	(27,800)

*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 $25,000 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?

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	$	921,000	$	262,000	$	406,000	$	253,000
Variable expenses		484,000		117,000		208,000		159,000
Contribution margin		437,000		145,000		198,000		94,000
Fixed expenses:
Depreciation		69,500		8,700		40,400		20,400
Liability insurance		43,600		20,500		7,900		15,200
Program administrators salaries		114,700		40,300		38,800		35,600
General administrative overhead*		184,200		52,400		81,200		50,600
Total fixed expenses		412,000		121,900		168,300		121,800
Net operating income (loss)	$	25,000	$	23,100	$	29,700	$	(27,800)

*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 $25,000 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?

		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)	$0	$0	$0

2-a.

Prepare a segmented income statement

Home Nursing	Meals On Wheels	House keeping
Revenues
Variable expenses
Contribution margin 0	0	0	0	0
Traceable fixed expenses: 0
Depreciation
Liability insurance
Program administrators salaries
Total traceable fixed expenses 0	0	0	0	0
Program segment margins 0	$0	$0	$0	0
General administrative overhead
Net operating income (loss)