Question 3 (Correspondence to Chapter of Incremental Analysis/Differential Analysis) Home Meals on House- Total Nursing Wheels keeping $900,000 $260,000 $400,000 $240,000 490,000 120,000 210,000 160,000 410,000 140,000 190,000 80,000 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 program revenues. 68,000 8,000 40,000 20,000 42.000 20,000 7,000 15,000 115,000 40,000 38,000 37,000 180,000 52,000 80,000 48,000 405,000 120,000 165,000 120,000 $5,000 $20,000 $25,000 S (40.000) The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organization's finances and considers the net operating income of $5,000 last year to be razor-thin. (Last year's results were very similar to the results for previous years and are represen- tative 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. Should the Housekeeping program be discontinued? Explain. Show computations to support your answer 2. Recast the above data in a format that would be more useful to management in assessing the long-run financial viability of the various services