Discount Drug Company Product Lines

In this scenario, the two alternatives under consideration are whether to keep the housewares product line or drop it$.$ What are advantages and disadvantages of keeping and dropping the housewares product line? Explain.

Product Line

Total Drugs Cosmetics House$-$wares Sales

Sales $$250,000$ $$125,000$ $$75,000$ $ $50,000$

Variable expenses $105,00050,00025,00030,000$

Contribution margin $145,00075,00050,00020,000$

Fixed expenses:

Salaries $50,00029,50012,5003,000$

Advertising $15,0001,0007,5006,500$

Utilities $2,0005005001,000$

Depreciation$-$fixtures $5,0001,0002,0002,000$

Rent $20,00010,0006,0004,000$

Insurance $3,0002,000500500$

General administrative $30,00015,0009,0006,000$

Total fixed expenses $125,00059,00038,00028,000$

Net operating income

$($loss$)$ $ $20,000$ $$16,000$ $$12,000$ $ $(8\mathrm{.}000)$

B$)$ With the following information, what fixed expenses are "Not Avoidable" and "Avoidable" expenses that management can determine $?$

$1.$ The salaries expense represents salaries paid to employees working directly on the product.

$2.$ The advertising expense represents advertisements specific to each product line

$3.$ The utilities expense represents utilities costs for the entire company. The amount charged to each product line is an on space occupied. $.$

$4.$ The depreciation expense represents depreciation on previously purchased fixtures that are used to display the various product lines.

Although the fixtures are nearly new, they are custom$-$built.

$5.$ The rent expense represents rent on the entire building housing the company, it is allocated to the product lines on dollars.

The monthly rent of $$20,000$ is under a long$-$term lease agreement.

$6.$ The insurance expense is for insurance carried on inventories within each of the three product lines.

$7.$ The general administrative expense represents the costs of accounting, purchasing, and general management, which the product lines on the basis of sales

dollars.

Prepare a statement of Not Avoidable and Avoidable cost.

C$)$ Followings are Traceable fixed expenses.

Salaries $50,00029,50012,5008,000$

Advertising $15,0001,0007,5006,500$

Depreciation$-$fixtures $5,0001,0002,0002,000$

Insurance $3,0002,000500500$

Common fixed expenses:

Utilities $2,000$

Rent $20,000$

General administrative $30,000$

What will be the consequences in continuing or discontinuing the product line when fixed expenses are traceable $?$ Does it make any difference$($s$)$ in decision making without tracing fixed expenses?