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

House- keeping

Revenues

$

919,000

$

268,000

$

400,000

$

251,000

Variable expenses

464,000

117,000

192,000

155,000

Contribution margin

455,000

151,000

208,000

96,000

Fixed expenses:

Depreciation

70,200

8,700

40,600

20,900

Liability insurance

44,100

20,400

7,900

15,800

Program administrators salaries

116,500

40,900

38,900

36,700

General administrative overhead*

183,800

53,600

80,000

50,200

Total fixed expenses

414,600

123,600

167,400

123,600

Net operating income (loss)

$

40,400

$

27,400

$

40,600

$

(27,600)

The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organizations finances and considers the net operating income of $40,400 last year to be razor-thin. (Last year's 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 perhaps 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 impact on net operating income by discontinuing housekeeping program? (Decreases should be indicated by a minus sign.)

		Total If	Difference: Net Operating
	Current Total	Housekeeping Is Dropped	Income Increase or (Decrease)
Revenues
Variable expenses
Contribution margin
Fixed expenses:
Depreciation
Liability insurance
Program administrators salaries
General administrative overhead
Total fixed expenses
Net operating income (loss)

2-a.	Prepare a segmented income statement.

	Home Nursing	Meals On Wheels	House keeping	Totals
Revenues
Variable expenses
Contribution margin
Traceable fixed expenses:
Depreciation
Liability insurance
Program administrators salaries
Total traceable fixed expenses
Program segment margins
General administrative overhead
Net operating income (loss)