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, 2011 Cross Training Shoes Golf Shoes Running Shoes Revenues $5,800,000 $6,900,000 $4,200,000 Cost of goods sold (3,016,000) (3,381,000) (2,814,000) Gross profit $2,784,000 $3,519,000 $1,386,000 Selling and administrative expenses (2,436,000) (2,484,000) (2,142,000) Operating income $348,000 $1,035,000 $(756,000) In addition, you have determined the following information with respect to allocated faced costs: Cross Gold Running Training Shoes Shoes Shoes Fixed costs: Cost of goods sold $928,000 $897,000 $798,000 Selling and administrative expenses 696,000 828,000 568,000 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 Previous Next Check My Work Save and Submit Assignment for Grading All work saved Fixed costs: Cost of goods sold $928,000 $897,000 $798,000 Selling and administrative expenses 696,000 828,000 588,000 These foxed 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 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 line, management expects the prodes of the company to increase by $756,000. a. Are management's decision and conclusions correct? Management's decision and conclusion are shoes be avoided if the line is eliminated. The pront be improved because the fixed costs used in malacturing and selling running b. Prepare a variable costing income statement for the three products. Enter a netloss as a negative number using a minut in Winslow Inc. Variable Costing Income Statements-Three Product Lines For the Year Ended December 31, 2011 Cross Training Shoes Golf Shoes Running Shoes D Previous Next > Check My Work for Gradina 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 Quoi dudu DOLO) DOLU Fixed costs: 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 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 S Management should keep the line and attempt to improve the profitability of the product by prices, volume, or Previous Next > Check My Work et for Grading Winslow Inc. Variable Costing Income Statements-Three Product Lines For the Year Ended December 31, 2011 Cross Training Shoes Golf Shoes Running Shoes Fixed costs: DOLOQ QOLD 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 shoe line were eliminated, then the contribution margin of the product line would and the foxed costs be eliminated Thus, the profit of the company would actually by SE Management should keep the line and attempt to improve the profitability of the product by prices, volume, or costs. Check My Work Previous Next