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Variable and Absorption Costing -Three Products Fleet-of-Foot Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for

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Variable and Absorption Costing -Three Products Fleet-of-Foot Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows: Fleet-of-Foot Inc. Product Income Statements-Absorption Costing For the Year Ended December 31 \begin{tabular}{lccc} \hline & Cross Training Shoes & Golf Shoes & Running Shoes \\ \cline { 2 - 4 } Revenues & $454,300 & $286,200 & $237,500 \\ Cost of goods sold & (236,200) & (140,200) & (159,100) \\ \cline { 2 - 4 } Gross profit & $218,100 & $146,000 & $78,400 \\ Selling and administrative expenses & (187,600) & (105,100) & (130,900) \\ \cline { 2 - 4 } Operating income & $30,500 & $40,900 & $(52,500) \\ \hline \hline \end{tabular} In addition, you have determined the following information with respect to allocated fixed costs: Cross Training Shoes Golf Shoes Running Shoes \begin{tabular}{lrrr} \hline Fixed costs: & & & \\ Cost of goods sold & $72,700 & $37,200 & $33,300 \\ Selling and administrative expenses & 54,500 & 34,300 & 33,300 \end{tabular} two lines. However, as a result of eliminating the running shoe line, management expects the profits of the company to increase by $52,500. a. Are management's decision and conclusions correct? Feedback V Check My Work Consider the impact the elimination of the running shoe line would have on the fixed costs. 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 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 prices, by ? . Management should keep the line and attempt to improve the profitability of the product by

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