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: Winstow Inc. Product Income Statements-Absorption Costing For the Year Ended December 31, 2011 Cross Training Shoes Golf Shoes Running Shoes Revenues $514,300 $293,200 5246,300 Cost of goods sold (267,400) (143,700) (165,000) Gross profit $246,900 $149,500 181,300 Selling and administrative expenses (212,300) (107,600) (135,800) Operating income $34,600 $41,900 $(54,500) In addition, you have determined the following information with respect to allocated fixed costs Cross Golf Training Running Shoes Shoes Shoes Fixed costs Cost of goods sold $82,300 $38,100 $34,500 Selling and administrative expenses 61,700 35,200 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 shoeline as unacceptable. As a result, it has decided to diminate 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 shoeline, management expects the pronts of the company to increase by 554,500 34,500 a. Are management's decision and conclusions correct a. Are management's decision and conclusions correct? Management's decision and conclusion are incorrect The profit will not running shoes will not be avoided if the line is eliminated be improved because the fixed costs used in manufacturing and selling Tec Check My Wor Consider the impact the elimination of the running shoeline would have on the fixed costs b. Prepare a variable costing income statement for the three products, inter a net ons 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 514.00 293,200 2460 Variable cost of goods sold 185,100 TON. 130.500 Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed manufacturing costs Fixed selling and administrative expenses Total fixed costs Operating income (los)