I need to check my work. Thanks!

Situation:

Julianne's of Appletown operates a high-end boutique in Appletown. The merchandise they sell are in three different product lines: Clothing, Shoes, and Purses/Handbags. During a recent fiscal year, Purses/Handbags has not been performing well. The owners are considering dropping this product line, although some of their key customers have stated that they appreciate the store carrying these items, resulting in the ability to match purses to outfits. Although you (a hired consultant) feel that this customer feedback is critical, the shop's owners, Julianne and her husband, Fred, only want to look at hard numbers. Julianne and Fred have asked you to analyze relevant costs and to make a recommendation for retaining or dropping this product line based on the numbers.

After analyzing the company's fixed expenses, you discovered the following:

Instructions: For the 8 fixed expenses, determine whether the costs are relevant (avoidable) or irrelevant (unavoidable).

And finally, should the Purses/Handbags be retained or discontinued? Make a new contribution margin income statement that supports your answer.

After analyzing the company's fixed expenses, you discovered the following: 1. The company pays $60,000 quarterly to rent its store and currently has a long-term lease. Portions of the store cannot be subdivided. If Purses/Handbags are not sold, it is anticipated that the clothing and shoes would be spaced out more evenly throughout the store. Rent would then be allocated based on percentage of sales. 2. Fixed salaries expenses are allocated in thirds, assuming that staff are helping customers in all product areas. If Purses/Handbags are not sold, salaries would remain the same. Salaries would then be allocated based on percentage of sales. 3. Advertising expenses represent a fixed cost and are budgeted for a specific dollar amount each year. They are allocated based on percentage of sales. Julianne's advertising expenses are related to the stores as a whole, not any individual product line. As a result, advertising expenses would continue for the full amount. 4. Utilities expenses represent the cost for electricity, heating, cooling, and water for the entire company. The amount charged to each product line is based on sales. 5. Depreciation-fixtures represents the depreciation cost related to the fixtures used to display the products and are allocated based on sales. Although some fixtures will no longer be needed if Purses/Handbags is dropped, they are rather old and would have no resale value. 6. Depreciation-Point of Sale System represents the depreciation cost related to the computerized cash register system and are allocated based on sales. This will continue to be used regardless of the number of products sold. 7. The insurance expense relates to insurance on the various inventories. If Purses/Handbags were dropped, the inventories in that department would be depleted, and the insurance premium would decrease as a result. Costs are currently allocated based on sales. 8. General administrative expenses relate to general management, accounting, human resources, legal, janitorial, and other back-office operations. These costs are allocated to each product line based on sales dollars. It is anticipated that some efficiencies are gained by having multiple product lines; however, it is anticipated that roughly half of the current allocation to Purses/Handbags would be saved if that line is dropped due to having fewer vendors to manage. Julanne's of Appletawn Contribution Margin Income Stitement For the Quarter Ending December 31, 208y. Sales: Variable Experses Contribution Margin Foced Expenoes: Rent Salaries Actrertising Utilities Dopreciation-Foituries Depreciation-Point of Sale Systum ifsurance General Administrative Total Fixed Expenses NetOperating income (Loss)