Reference no: EM132193379

Question - 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:

	Total	Home Nursing	Meals On Wheels	House- keeping
Revenues	$924,000	$264,000	$407,000	$253,000
Variable expenses	469,000	117,000	202,000	150,000
Contribution margin	455,000	147,000	205,000	103,000
Fixed expenses:
Depreciation	70,100	8,900	40,900	20,300
Liability insurance	43,400	20,300	7,400	15,700
Program administrators' salaries	114,600	40,800	38,200	35,600
General administrative overhead'	184,800	52,800	81,400	50,600
Total fixed expenses	412,900	122,800	167,900	122,200
Net operating income (loss)	$42,100	$24,200	$37,100	$(19,200)
'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 $42,100 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?