SS=lasse eBook Calculator Print Item 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: Winslow Inc. Product Income Statements-Absorption Costing For the Year Ended December 31, 20Y1 Cross Training Shoes Golf Shoes Running Shoes Revenues $334,400 $204,000 $169,300 Cost of goods sold (173,900) (100,000) (113,400) Gross profit $160,500 $104,000 $55,900 Selling and administrative expenses (138,000) (74,900) (93,400) Operating income $22,500 $29,100 $(37,500) In addition, you have determined the following information with respect to allocated fixed costs: Cross Golf Running Training Shoes Shoes Shoes Fixed costs: Cost of goods sold $53,500 $26,500 $23,700 Selling and administrative expenses 40,100 24,500 23,700 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 thin ho WIDT Falem 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 the other two lines. However, as a result of eliminating the running shoe line, management expects the profits of the company to increase by $37,500. a. Are management's decision and conclusions correct? Management's decision and condusion are manufacturing and selling running shoes The profit be improved because the fixed costs used in 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 Winslow Inc. Variable Costing Income Statements-Three Product Lines For the Year Ended December 31, 20Y1 Cross Training Shoes Golf Shoes Running Shoes Fixed costs: Previous cator=&inprogress false eBook Calculator Print Item MURTHER COUWDENTICITETTURE CITIES For the Year Ended December 31, 2011 Cross Training Shoes Golf Shoes Running Shoes Fixed costs: QOLOQ QUOD TUDI doo Total fixed costs Operating Income (loss) c. Use the report in (b) to determine the profit impact of eliminating the running shoe line, assuming no other changes If the running shoes 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