Variable and Absorption Costing-Three Products Winsiow Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follons: Winslow Inc. Product Income Statements-Absorption Costing In addition, you have determined the following information with respect to allocated fixed costs: 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 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 s 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 profits of the company to increase by $53,100. When recasting the variable costing income statement, remember that under variable costing, all fixed factory overhead costs are deducted in the period: Incurred, Revenues - Varlable Cost of Goods Sold = Manufacturing Margin: Manufacturing Margin - Variable Selling and Administrative Expenses = Contribution Margin; Contribution Margin - (Fixed Manufacturing Costs + Fixed Selling and Administrative Expenses) = Operating income Variable and Absorption Costing-Three Products Winsiow Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follons: Winslow Inc. Product Income Statements-Absorption Costing In addition, you have determined the following information with respect to allocated fixed costs: 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 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 s 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 profits of the company to increase by $53,100. When recasting the variable costing income statement, remember that under variable costing, all fixed factory overhead costs are deducted in the period: Incurred, Revenues - Varlable Cost of Goods Sold = Manufacturing Margin: Manufacturing Margin - Variable Selling and Administrative Expenses = Contribution Margin; Contribution Margin - (Fixed Manufacturing Costs + Fixed Selling and Administrative Expenses) = Operating income