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The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organizations finances and considers the net operating income of $53,600 last year to be too small. (Last years 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. Miyama asked for more information about the financial advisability 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. Depreciation charges assume zero salvage value. 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:

	1a.	What is the impact on net operating income by discontinuing housekeeping program?
				Total if house-	Difference: Net Operating
			Current Total	Keeping is Dropped	Income increase or decrease
Revenues
Variable expense
Contribution Margin
Fixed Expenses
Depreciation
Liability Insurance
Program administrators salaries
General administrative overhead
total fixed expense
Net operating income (loss)

1b.	Should the housekeeping program be discontinued?

Yes or no

2a.	Prepare a segmented income statement.

		Home	Meals On	House
	Totals	Nursing	Wheels	Keeping
Revenues
Variable expense
Contribution Margin
Traceable fixed expenses:
Fixed Expenses
Depreciation
Liability Insurance
Program administrators salaries
total traceable fixed expense
Program segment margins
General administrative overhead
Net operating income (loss)

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

Yes or No

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