Carl on Duty Footwear manufactures and sells three products. The income statements prepared under the absorption costing method for the three products are as follows:

Carl on Duty Footwear
Product Income Statements - Absorption Costing
For the Year Ended January 31
Financial Categories	Non-Slip Shoes	Steel Toe Boots	Work Boots
Revenues	$5,700,000	$6,900,000	$4,200,000.00
Cost of goods sold	$3,016,000	$3,392,000	$2,814,000.00
Gross profit	$2,684,000	$3,508,000	$1,386,000
Selling and admin expenses	$2,466,000	$2,484,000	$2,041,000
Income from operations	$218,000	$1,024,000	($655,000)
Fixed Costs
Cost of goods sold	$928,000	$897,000	$798,000
Selling and admin expenses	$696,000	$828,000	$588,000

These fixed costs are used to support all three product lines and will not change with the elimination of any one product. In addition, you have determined that the effects of inventory may be ignored.

The management of the company has deemed the profit performance of the running shoe line as unacceptable. As a result, it has decided to eliminate the running shoe line. Management does not expect to be able to increase sales in the other two lines. However, as a result of eliminating the work boot line, management expects the profits of the company to increase by $655,000.

1. Do you agree with managements decision and conclusions? Explain your answer.

2. Prepare a variable costing income statement for the three products.

3. Use the report in (a) to determine the profit impact of eliminating the work boot line assuming no other changes.