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Variable and Absorption Costing-Three Products Winslow Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows: In addition, you have determined the following information with respect to allocated fixed costs: 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 eliminatino the runnina shoe line. management exoects the orofits of the comoanv to increase bv $756,000. a. Are management's decision and conclusions correct? Management's decision and conclusion are The profit costs used in manufacturing and selling running shoes be improved because the fixed be avoided if the line is eliminated. b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign. c. Use the report in (b) to determine the profit impact of eliminating the running shoe line, assuming no other changes. If the running shoe line were eliminated, then the contribution margin of the product line would c. Use the report in (b) to determine the profit impact of eliminating the running shoe line, assuming no other changes. If the running shoe line were eliminated, then the contribution margin of the product line would and the fixed costs be eliminated. Thus, the profit of the company would actually by $ Management should keep the line and attempt to improve the profitability of the product by prices, volume, or costs