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Jackson County SeniorServices is a nonprofit organization devoted to providing essentialservices to seniors who live in their own homes within the JacksonCounty area. Three services are provided for seniors—home nursing,Meals On Wheels, and housekeeping. Data on revenue and expenses forthe past year follow:

		Total		HomeNursing		Meals OnWheels		House- keeping
Revenues	$	928,000	$	266,000	$	409,000	$	253,000
Variableexpenses		473,000		120,000		199,000		154,000
Contributionmargin		455,000		146,000		210,000		99,000
Fixedexpenses:
Depreciation		69,900		8,200		40,800		20,900
Liabilityinsurance		43,700		20,700		7,200		15,800
Programadministrators’ salaries		115,300		40,800		38,900		35,600
Generaladministrative overhead*		185,600		53,200		81,800		50,600
Total fixedexpenses		414,500		122,900		168,700		122,900
Net operatingincome (loss)	$	40,500	$	23,100	$	41,300	$	(23,900)

*Allocated on the basis of program revenues.

The head administratorof Jackson County Senior Services, Judith Miyama, considers lastyear’s net operating income of $40,500 to be unsatisfactory;therefore, she is considering the possibility of discontinuing thehousekeeping program.

The depreciation inhousekeeping is for a small van that is used to carry thehousekeepers and their equipment from job to job. If the programwere discontinued, the van would be donated to a charitableorganization. None of the general administrative overhead would beavoided if the housekeeping program were dropped, but the liabilityinsurance and the salary of the program administrator would beavoided.

Required:

1-a. What is thefinancial advantage (disadvantage) of discontinuing theHousekeeping program?

1-b. Should theHousekeeping program be discontinued?

2-a. Prepare aproperly formatted segmented income statement.

2-b. Would a segmentedincome statement format be more useful to management in assessingthe long-run financial viability of the various services?