Problem 12-19 Dropping or Retaining a Segment [LO12-2] JacksonCounty Senior Services is a nonprofit organization devoted toproviding essential services to seniors who live in their own homeswithin the Jackson County area. Three services are provided forseniorsâhome nursing, Meals On Wheels, and housekeeping. Data onrevenue and expenses for the past year follow: Total Home NursingMeals On Wheels House- keeping Revenues $ 935,000 $ 269,000 $409,000 $ 257,000 Variable expenses 469,000 116,000 199,000 154,000Contribution margin 466,000 153,000 210,000 103,000 Fixed expenses:Depreciation 69,200 8,500 40,500 20,200 Liability insurance 44,10020,900 7,600 15,600 Program administratorsâ salaries 116,000 40,50038,900 36,600 General administrative overhead* 187,000 53,80081,800 51,400 Total fixed expenses 416,300 123,700 168,800 123,800Net operating income (loss) $ 49,700 $ 29,300 $ 41,200 $ (20,800)*Allocated on the basis of program revenues. The head administratorof Jackson County Senior Services, Judith Miyama, considers lastyearâs net operating income of $49,700 to be unsatisfactory;therefore, she is considering the possibility of discontinuing thehousekeeping program. The depreciation in housekeeping is for asmall van that is used to carry the housekeepers and theirequipment from job to job. If the program were discontinued, thevan would be donated to a charitable organization. None of thegeneral administrative overhead would be avoided if thehousekeeping program were dropped, but the liability insurance andthe salary of the program administrator would be avoided. Required:1-a. What is the financial advantage (disadvantage) ofdiscontinuing the Housekeeping program? 1-b. Should theHousekeeping program be discontinued? 2-a. Prepare a properlyformatted segmented income statement. 2-b. Would a segmented incomestatement format be more useful to management in assessing thelong-run financial viability of the various services?
