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: 96,000 Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead* Total fixed expenses Net operating income (loss) Home Meals On House- Total Nursing Wheels keeping $924,000 $268,000 $405,000 $ 251,000 475,000 114,000 206,000 155,000 449,000 154,000 199,000 69,600 8,100 40,500 21,000 43,900 20,900 7,800 15,200 116,100 40,500 38,700 36,900 184,800 53,600 81,000 50,200 414,400 123, 100 168,000 123,300 $ 34,600 $ 30,900 $ 31,000 $(27,300) *Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $34,600 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? What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? Should the Housekeeping program be discontinued? OYes Ono Prepare a properly formatted segmented income statement. Total Home Nursing Meals On Wheels House- keeping Revenues Variable expenses Contribution margin Traceable fixed expenses: Depreciation Liability insurance Program administrators' salaries Total traceable fixed expenses Program segment margins General administrative overhead Net operating income (loss) Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services? OYes No
