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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	$	925,000	$	265,000	$	402,000	$	258,000
Variable expenses		475,000		120,000		196,000		159,000
Contribution margin		450,000		145,000		206,000		99,000
Fixed expenses:
Depreciation		69,400		8,600		40,300		20,500
Liability insurance		43,300		20,400		7,500		15,400
Program administrators salaries		114,800		40,600		38,500		35,700
General administrative overhead*		185,000		53,000		80,400		51,600
Total fixed expenses		412,500		122,600		166,700		123,200
Net operating income (loss)	$	37,500	$	22,400	$	39,300	$	(24,200)

*Allocated on the basis of program revenues.

The head administrator of Jackson County Senior Services, Judith Miyama, considers last years net operating income of $37,500 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. Based on the financial advantage (disadvantage) of discontinuing the Housekeeping program calculated in requirement Req 1A, 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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