Superb Professors

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 $ 920,000 $ 261,000 $ 405,000 $ 254,000 Variable expenses 468,000 110,000 198,000 160,000 Contribution margin 452,000 151,000 207,000 94,000 Fixed expenses: Depreciation 69,700 8,800 40,700 20,200 Liability insurance 43,900 20,200 7,700 16,000 Program administrators’ salaries 114,300 40,600 38,200 35,500 General administrative overhead* 184,000 52,200 81,000 50,800 Total fixed expenses 411,900 121,800 167,600 122,500 Net operating income (loss) $ 40,100 $ 29,200 $ 39,400 $ (28,500)
*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 $40,100 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?

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