Variable and Absorption Costing-Three Products Winslow Inc. manufactures and selis three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follow Winslow Inc. Product Income Statements-Absorption Costing In adeition, you have determined the following information with respect to allocated fixed costs: These fixed costs are used to suppert 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 ianored. 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. 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 profits of the company to increase by $46,000. a. Are management's decision and conclusions correct? Management's decision and conciusion are - The profit be improved because the fixed costs used in manufacturing and seling running shoes be avolded if the line is eliminated. Winslow Inc. Variable Costing income Statements-Three Product Lines For the Year Fnded Derember 31. 2nvi 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 fred costs eliminated. Thus, the profit of the company would actually by 5 Management should keep the line and attempt to improve the proftablity of the product by prices, volume, of costs