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 seniorshome nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow:

Total Home Nursing Meals On Wheels Housekeeping

Revenues $ $ $ $

Variable expenses

Contribution margin

Fixed expenses:

Depreciation

Liability insurance

Program administrators salaries

General administrative overhead

Total fixed expenses

Net operating income loss $ $ $ $

Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $ 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:

a What is the financial advantage disadvantage of discontinuing the Housekeeping program?

b Based on the financial advantage disadvantage of discontinuing the Housekeeping program calculated in requirement Req A should the Housekeeping program be discontinued?

a Prepare a properly formatted segmented income statement.

b Would a segmented income statement format be more useful to management in assessing the longrun financial viability of the various services?