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. Home Meals On House Total Nursing Wheels keeping $926,000 $ 269,000 $405,000 $252,000 482,000 113,000 210,000 159,000 Revenues Variable expenses Contribution margin 444,000 156,000 195,000 93,000 Fixed expenses Depreciation Liability Insurance Program administrators' salaries Gereral administrative gyerhead 69,900 43,300 114.400 9,000 20,800 40,700 7,200 38,800 20,200 15,300 35,200 185,200 53,800 81.000 50,400 Total fxed expenses 412,800 124,000 167,700 121,100 Net operating income $ 31,200 $ 32,000 $ 27,300 $ (28.100) (loss) "Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organization's finances and considers the net operating income of $31200 last year to be razor thin. (Last year's results were very similar to the results for previous years and are representative 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. Mlyama 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-a. What is the impact on net operating Income by discontinuing housekeeping program? Total of Difference: Ne Operating Income Increase Decrease] Current Total Housekeeping Is Dropped $ 925,000 Revenues Variable expenses Contribution margin 482,000 444,000 o Feed excess 69,900 43,300 Depreciation Liability insurance Program administrs salaries General administrative overhead Total med expenses Net operating income (oss) 144,400 185,200 442,800 S 1.2005 15. Should the housekeeping program be discontinued? O Yes No 2-a. Prepare a segmented income statement Home Nursing Meals On Wheels House keeping Tocals Revenues Variable a penses Contrbution margin Traceable fed expenses Depreciation Liability insurance Program administrators' salaries Total traceable fed excess Program segment margir General administrative overhead Net operating income (0) 5 OS 2 b. Would a segmented income statement format be more useful to management in assessing the long run financial viability of the various services. O Yes ONO
