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 $553,400 $348,600 $303,300 Cost of goods sold 287,800 170,800 203,200 Gross profit $265,600 $177,800 $100,100 Selling and administrative expenses 228,400 128,000 167,200 Income (loss) from operations $37,200 $49,800 $(67,100) In addition, you have determined the following information with respect to allocated fixed costs: Golf Cross Training Shoes Running Shoes Shoes Fixed costs: Cost of goods sold $88,500 $45,300 $42,500 Selling and administrative expenses 66,400 41,800 42,500 These fixed costs are used to support all three product lines. In addition, you have determined that the b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign; enter all other amounts as positive numbers. Winslow Inc. Variable Costing Income Statements-Three Product Lines For the Year Ended December 31, 2011 Cross Training Golf Shoes Shoes Running Shoes Revenues Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin QORID QOU. Fixed costs: Fixed manufacturing costs Fixed selling and administrative expenses Total fixed costs Income from operations Feedback c. Use the report in (b) to determine the profit impact of eliminating the running shoes line, assuming no other changes If the running shoes line were eliminated, then the contribution margin of the product line would be eliminated and the fixed costs would not be eliminated. Thus, the profit of the company would actually decline by $ Management should keep the line and attempt to improve the profitability of the product by increasing prices, increasing volume, or reducing costs. Feedback Feedback