Variable and Absorption Cosong-Three Products Winslow the manufactures and sells three types of shoes. The income statentents 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, 2011 Cross Training Shoes Golf Shoes Running Shoes Revenues 5491,900 $290,200 $252,500 Cost of goods sold (255,800) (142,200) (169,200) Gross profit $236,100 $148,000 $63,300 Selling and administrative expenses (203,000) (106,600) (139,100) Operating income $33,100 $41,400 $(55,800) 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 $78,700 $37,700 $35,400 Selling and administrative expenses 59,000 34,800 35,400 These fwed 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 running shoe tine, management expects the profits of the company to increase by 555,500 a. Are management's decision and conclusions correct? Management's decision and conclusion are incorrect will not be avoided if the line is eliminated. The profit will not be improved because the foxed costs used in manufacturing and selling running shoes 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, 2011 Cross Training Shoes Golf Shoes Running Shoes Revenues 491.900 290,200 252.200 x Variable selling expenses X 177,100 104,500 133.800 Variable cost of goods sold x 314.800 185,700 118.400 X Variable selling and administrative expenses Contribution margin Fixed costs: Variable cost of goods manufactured X Variable selling and administrative expenses X Total fixed costs Operating income foss) 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 be eliminated and the fixed costs would not be eliminated profit of the company would actually decline Management should keep the line and attempt to improve the profitability of the product by increar prices, increasing volume, or reducing costs by s