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CoursHeroTranscribedText: Cumberland County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Cumberland County area. Three services are provided for seniorshome nursing. Meals on Wheels. and housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform tests ordered by their physicians. The Meals on Wheels program delivers a hot meal once a dayto each senior enrolled in the program. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for the past year follow: Home Meals on House Total Nursing l.~.|hleels keeping Revenues $953,999 $279,299 $429,999 $256,899 Variable expenses 529,999 129,899 22?,599 132,699 Contribution margin 433,199 143,499 299,599 84,299 Fixed expenses: Depreciation amass 9,569 41,959 21,959 Liability insurance 44,599 21,959 ?,?99 15,849 Program administrators' salaries 119,559 41, ?59 39,959 38,?59 General administrative overhead" 192,699 55,549 35,699 51,569 Total fixed expenses 42?,499 127,999 173,499 12?,999 Operating income (loss) 5 55799 25 215499 5 3.199: "423893) "Allocated on the basis ofprogram revenues. The head administrator of Cumberland County Senior Services, Judith Ewa. is concerned aboutthe organization's finances and considers the operating income of $5.700 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. Ewa asked for more information about the financial advisability ofdiscontinuing the housekeeping program. The depreciation in the housekeeping category is for a small van that is used to carry the housekeepers and their equipment fromjob to job. lfthe program were discontinued, the van would be donated to a charitable organization. Depreciation charges assume zero salvage value. None of the general administrative overhead would be avoided ifthe housekeeping program were dropped, but the liability insurance and the salary ofthe program administrator would be avoided. Required: 1-9. Compute the change in net operating income for the company as a whole if housekeeping program be discontinued. ::l 1-b. Should the housekeeping program be discontinued? O Yes 0 No 2. Would a segmented income statement format be more useful to management in assessing the longrun financial viability ofthe various services? 0 Yes O No

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