Reference no: EM132521747

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                       $930,000               $267,000                    $404,000                             $259,000

Variable expenses               471,000               118,000                     201,000                               152,000

Contribution margin                459,000             149,000                   203,000                              107,000

Fixed expenses:

Depreciation                             69,700                  8,100                40,700                                   20,900

Liability insurance                      43,800                  20,500               7,800                                   15,500

Program administrators' salaries      114,300                 40,800            38,400                                    35,100

General administrative overhead        186,000               53,400           80,800                                      51,800

Total fixed expenses                        413,800                 122,800       167,700                                     123,300

Net operating income (loss)                  $45,200               $26,200       $35,300                                  $ (16,300)

• 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 $45,200 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:

Question 1-a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program?

Question 1-b. Should the Housekeeping program be discontinued?

Question 2-a. What is the properly formatted segmented income statement.

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