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Variable and Abeorption Costing-Three Products Feet-of-Foot inc. manufactures and selis three types of shoes. The ineome statements prepored under the abeorption costing method for the three shoes are as follows: Fleet-of-Foot Ine. Product Income Staternents--Nbsorption Costing In addition, you have determined the following information with respect to allocated fixed coctst These fixed costs are used to support all three product lines and will not change w th the eimnation of any ooe product, tn addition, you have determined that the effects of inventory may be ignored. The management of the company has deemed the profit pertommance of the rumning ahoe line as unacceptabie. As a resul, has decided to eliminate the rurning shoe lne. Management does not expect to be able to increase sales in the other two lines, However, as a result of eliminating the running shoe line, management expects the profits of the company to increase by $48,200. a. Are management's decision and condusions correct? Managernent's decision and conclusion are . The profit be improved because the fixed costs used in manufacturing and selling running shoes be avoided if the line is eliminated. * Chect uy wat Consider the impact the elimination of the running shoe line would have on the fixed costs: b. Prepare a variable couting income statement for the three products, Enter a net loss as a negative number using a minus sign. b. Prepare a variable costing income statement for the three products. Enter a net loss as a negativ Fleet-of-Foot Inc. Variable Costing Income Statements-Three Product C. Use the report in (b) to determine the profit impact of eliminating the running shoe line, assuming no other changes. If the running ahoes line were eliminated, then the contribution margin of the product line would be eliminated and the fixed costs wouk not be eliminated. Thus, the profit of the company would actually declime by 1 . Management ahould keep the line and attempt to improve the profitability of the product by prices, volume, or rrducing costs