T1. Cumberland County Senior Services is a non-profit organization devoted to providing essential services to seniors who live in theirown homes within the Cumberland County area. Three services are provided for seniors-home nursing, Meals on Wheels, andhousekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to performtests ordered by their physicians. The Meals on Wheels program delivers a hot meal once a day to each senior enrolled in theprogram. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses forthe past year follow.RevenuesVariable expensesContribution marginFixed expenses:DepreciationLiability insuranceProgram administrators' salariesGeneral administrative overheadTotal fixed expensesOperating income (loss)Total$1,044,000581, 200462,800$74,08047,920125,400208,800456,200HoneNursing$301,600142,400159,2009,28022,40044,00060,320136,0006,600 $ 23,200Meals onWheelsHouse-keeping$464,000 $278,400250,000214,00042,4008,60040,40092,800184, 200$ 29,800188,80089,60022,40016,92041,00055,680136,000$(46,400)"Allocated on the basis of program revenues.The head administrator of Cumberland County Senior Services, Judith Ewa, is concerned about the organization's finances andconsiders the operating income of $6,600 last year to be razor-thin. (Last year's results were very similar to the results for previousyears and are representative of what would be expected in the future.) She feels that the organization should be building its financialreserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ewa asked for moreinformation about the financial advisability of discontinuing the housekeeping program.The depreciation in the housekeeping category is for a small van that is used to carry the housekeepers and their equipment from jobto job. If the program were discontinued, the van would be donated to a charitable organization. Depreciation charges assume zerosalvage value. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but theliability insurance and the salary of the program administrator would be avoided. Required:1-a. Compute the change in net operating income for the company as a whole if housekeeping program be discontinued.in net operating income by1-b. Should the housekeeping program be discontinued?O YesO No2. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of thevarious services?Ⓒ YesO No

In the decision making for a segment to continue or discontinue, Relevant costs are used for making…

Cumberland County Senior Services is a non-profit organization devoted to providing essential services to seniors who li own homes within the Cumberland County area. Three services are provided for seniors-home nursing, Meals on Whee housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and tests ordered by their physicians. The Meals on Wheels program delivers a hot meal once a day to each senior enrolled program. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and ex the past year follow: HOME Home Nursing Meals on Wheels $301,600 $464,000 142,400 250,000 159,200 214,000 Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overheade Total fixed expenses Operating income (loss) Total $1,044,000 $ 581,200 462,800 74,080 47,920 125,400 208, 800 456,200 9,280 22,400 44,000 60,320 136,000 6,600 $ 23,200 42,400 8,600 40,400 92,800 184,200 $ 29,800 House- keeping $278,400 188,800 89,600 22,400 16,920 41,000 55,680 136,000 $(46,400)