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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	$	922,000	$	268,000	$	403,000	$	251,000
Variable expenses		471,000		118,000		195,000		158,000
Contribution margin		451,000		150,000		208,000		93,000
Fixed expenses:
Depreciation		69,900		8,900		40,700		20,300
Liability insurance		43,700		20,200		7,700		15,800
Program administrators salaries		114,700		40,500		38,900		35,300
General administrative overhead*		184,400		53,600		80,600		50,200
Total fixed expenses		412,700		123,200		167,900		121,600
Net operating income (loss)	$	38,300	$	26,800	$	40,100	$	(28,600)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organizations finances and considers the net operating income of $38,300 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.)

1-b.	Should the housekeeping program be discontinued?
	Yes No

2-a.	Prepare a 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.
	Yes No

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

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