PROBLEM 619 Dropping or Retaining a Segment L06-2 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 Page 319 Total $900.000 490.000 Home Nursing $260.000 120.000 140.000 Meals On Wheels $400.000 210.000 190.000 House-keeping $240.000 160.000 410,000 80,000 40.000 7.000 Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators" salaries General administrative overhead Total fixed expenses Net operating income (loss) Allocated on the basis of programeveces 68,000 42.000 115,000 180.000 405.000 $ 5.000 8.000 20.000 40.000 52.000 120.000 $ 20,000 38.000 80.000 165.000 20,000 15.000 37.000 48.000 120.000 S (40.000) S 25.000 The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $5,000 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. a Required: 1. What is the financial advantage (disadvantage) of discontinuing the housekeeping program? Should the housekeeping program be discontinued? Explain. 2. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run financial viability of its various services