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 seniorshome nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow: Total Home Nursing Meals On Wheels House- keeping Revenues $ 934,000 $ 268,000 $ 408,000 $ 258,000 Variable expenses 473,000 119,000 197,000 157,000 Contribution margin 461,000 149,000 211,000 101,000 Fixed expenses: Depreciation 68,900 8,100 40,500 20,300 Liability insurance 43,900 21,000 7,600 15,300 Program administrators salaries 116,000 40,700 38,600 36,700 General administrative overhead* 186,800 53,600 81,600 51,600 Total fixed expenses 415,600 123,400 168,300 123,900 Net operating income (loss) $ 45,400 $ 25,600 $ 42,700 $ (22,900) *Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $45,400 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?
