*PLEASE SHOW CALCULATIONS*

1. JCSS is a non-profit organization devoted to providing essential services to senior citizens who live in the Jackson county area. Three services are provided to seniors who live in their own homes: home nursing, meals on wheels and housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform tests ordered by their doctors. The meals-on-wheels program delivers hot meals once a day to each senior enrolled in the program. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for the past year follow:

	Total	Home Nursing	Meals on Wheels	House- keeping
Sales	$900,000	$260,000	$400,000	$240,000
Variable expenses	490,000	120,000	210,000	160,000
Contribution Margin	410,000	140,000	190,000	80,000
Fixed expenses:
Depreciation	68,000	8,000	40,000	20,000
Liability Insurance	42,000	20,000	7,000	15,000
Program administrators salary	115,000	40,000	38,000	37,000
General administrative overhead*	180,000	52,000	80,000	48,000
Total fixed expenses	405,000	120,000	165,000	120,000
Income	5,000	20,000	25,000	-40,000

*Allocated on the basis of program revenues.

Judith Miyama, JCSSs head administrator, is concerned about the organizations finances and considers income to be inadequate. Last years results were similar to those from previous years and are indicative of expected future results. After seeing the above numbers, Ms. Miyama is considering discontinuing the Housekeeping program.

The depreciation charged to Housekeeping is for a van used to carry housekeepers and their equipment from job to job. If JCSS discontinues Housekeeping, it would donate the van to a local church. JCSSs general overhead would be unaffected by a decision to discontinue Housekeeping. The liability insurance and program administrators salaries are traceable to each program and could be avoided if Housekeeping is discontinued.

A. Should the Housekeeping program be discontinued? (Pick best answer.)

1. No. JCSSs income will decrease by $8,000 if Housekeeping is dropped.
2. Yes. JCSSs income will increase by $40,000 if Housekeeping is dropped.
3. No. JCSSs income will decrease by $28,000 if Housekeeping is dropped.
4. No. JCSSs cash flow decreases by $28,000 if Housekeeping is dropped.