Question

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 seniors-home nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow: House keeping 404,000 259,000 160,000 Meals On Home Nursing Wheels Total $926,000 263,000 $ 473,000 453,000 Revenues Variable expenses 112,000 201,000 Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators 151,000 203,000 99,000 8,700 20,200 20,500 15,900 69,900 43,700 40,700 7,600 35,100 113,600 40, 200 38,300 salaries General administrative 51,800 52,600 185,200 80,800 overhead Total fixed expenses 412,400 121,700 167,400 123,300 35,600 $(24,300) 40,600 $ Net operating income (loss) 29,300 $ *Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $40,600 to be unsatisfactory; therefore, she is considering the possibility of discontinuing the housekeeping program.

Answer 1

1a
	Current Total	Total If house keeping is Dropped	Difference: Net Operating Income
Revenues	926000	667000	-259000
Variable expenses	473000	313000	160000
Contribution margin	453000	354000	-99000
Fixed expenses:
Depreciation	69900	69900	0
Liability insurance	43700	27800	15900
Program administrators’ salaries	113600	78500	35100
General administrative overhead	185200	185200	0
Total fixed expenses	412400	361400	51000
Net operating income (loss)	40600	-7400	-48000
Financial (disadvantage) $(48000)
1b
No, the housekeeping program should not be discontinued
2a
	Total	Home nursing	Meals on Wheels	House Keeping
Revenues	926000	263000	404000	259000
Variable expenses	473000	112000	201000	160000
Contribution margin	453000	151000	203000	99000
Traceable fixed expenses:
Depreciation	69900	8700	40700	20500
Liability insurance	43700	20200	7600	15900
Program administrators’ salaries	113600	40200	38300	35100
Total traceable fixed expenses	227200	69100	86600	71500
Program segment margins	225800	81900	116400	27500
General administrative overhead	185200
Net operating income (loss)	40600
2b
Yes, a segmented income statement would be more useful