Exercise 8 (Dropping or Retaining a Segment) Paragon Senior Services is a nonprofit organization devoted to providing . essential services to seniors who live in their own homes within the Pasig area. Three services are provided for seniors wheels, and housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform tests ordered by their physicians. The meals on wheels program delivers a hot meal once a day to each senior enrolled in the program: The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for the past year follow: - home nursing, meals on House- Meals on Wheels P400,000 210,000 190,000 Ноme Nursing P260,000 120,000 140,000 keeping P240,000 160,000 80,000 Total P900,000 490,000 410,000 Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead* Total fixed expenses Net operating income (loss) 68,000 42,000 115,000 180,000 405,000 P 5,000 8,000 20,000 40,000 52,000 120,000 P 20.000 40,000 7,000 38,000 80,000 165.000 P 25,000 20,000 15,000 37,000 48,000 120.000 P(40.000) * Allocated on the basis of program revenues. The head administrator of Paragon Senior Services, Matsu Amamiya, is concerned about the organization's finances and considers the net operating income of P5,000 last year to be razor-thin. (Last year's results were very similar to the results of 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 recessio. After seeing the above report, Ms. Amamiya, 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. Depreciation charges assume zero salvage value. administrative overhead would be avoided if the housekeeping program were None of the general