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:

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $41,700 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. 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?

Meals On House- keeping $921,000 $ 264,000 406,000 251,000 153,000 98,000 Home Total Nursing Wheels Revenues Variable expenses Contribution margin Fixed expenses: 466,000 114,000 199,000 455,000 150,000 207,000 Depreciation Liability insurance Program administrators' salaries General administrative overhead* 20,900 15,800 36,300 50,200 123,200 $ 41,700 $ 27,700 $ 39,200 $(25,200) 40,600 7,700 38,300 81,200 413,300 122,300 167,800 70,100 44,300 114,700 184,200 8,600 20,800 40,100 52,800 Total fixed expenses Net operating income (loss)