"We're just acknowledging that if we discontinued overnight cases, the contribution margin of 260,000 will go away. It will be lost, okay? Step two: Calculate the fixed costs that would be avoided if the segment is dropped, and do not put this number in parentheses. Okay, so now in other words we got to work our way down through these six fixed expenses starting with the salary of the product line manager. What do you think, avoidable or not? And, by the way, when I say avoidable, that means relevant. Well, it's the salary of the product line manager, so we're implying he manages the overnight cases product line. If we discontinue overnight cases, that manager has no product line to manage, and so we would assume that, yes, that person would be let go, and we would be able to avoid the 21,000 dollars, okay? Next, general factory overhead, 104,000 dollars, and it has a little asterisk that says, "Allocated on the basis of machine hours." Let me give you just some practical tips in this chapter. When you see the word general stuck in front of the factory overhead or that little asterisk, and it says "allocated on the basis of" something, that's a guarantee you need to ignore it. What we're saying is, the company incurs a certain amount of general factory overhead that it basically arbitrarily allocates out to product lines, but whether I discontinue the overnight cases or not, that general factory overhead in total will continue to be incurred, so you see that word general or you see that little asterisk saying "allocated on the basis of" something, man, that is a flashing red light saying, "Ignore," okay? Depreciation of equipment, I said in a previous video it's always ignored in this chapter, so to stay true to that, ignore it, okay? Advertising is traceable, so we're trying to intimate that this is advertising specific to overnight cases. It's traceable to the overnight cases, so if they go away, I won't advertise those, and I will avoid 110,000 dollars in advertising, okay? Insurance on inventories, if I discontinue overnight cases, I will not keep any overnight cases in inventory. If I have no overnight cases in inventory, then I don't need to buy any insurance on inventory that I don't have, so the 9,000 will go away, okay? Now you might be getting a hint because I'm already subtotaling that out at 140,000 that I'll come back here and look at the purchasing department of 50,000, and here we go again with one of these little symbols saying, "Allocated on the basis of sales dollars." No, ignore. It's an arbitrary allocation, okay? We're saying that the total expenses to run the purchasing department are being arbitrarily allocated to product lines, but whether I keep or drop overnight cases, the total cost to operate purchasing will not change, okay? Ignore it. So then that brings us to step three. Add the amounts of steps one and two. If the result is a negative number, then do not drop the segment. If it's a positive number, drop it. So there's step three, and we see the net disadvantage of dropping the cases is 120,000 dollars, so in this situation, we should choose to keep the cases. We'd be 120,000 dollars better off if we keep the cases." Which of the following statements is true with respect to the example described in the video?

multiple choice 2
The general factory overhead was treated as a relevant cost.
The insurance on inventories was treated as a relevant cost.
The salary of the product-line manager was treated as an irrelevant cost.
The advertising (traceable) was treated as an irrelevant cost.