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, 201 Cross Training Shoes Golf Shoes Running Shoes Revenues Cost of goods sold Gross profit Selling and administrative expenses $442,600 $274,400 $233,200 (230,200) (134,500) (156,200) $212,400 $139,900 $77,000 (182,700) (100,700) (128,600) $29,700 $39,200 $(51,600) Operating income In addition, you have determined the following information with respect to allocated foxed costs: Fixed costs Cost of goods sold Selling and administrative expenses Cross Training Shoes Golf Running Shoes Shoes $70,800 $35,700 $32,600 53,100 32,900 32,600 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. 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 $51,600. a. Are management's decision and conclusions correct? Management's decision and conclusion are D The profit shoes B be avoided if the line is eliminated. be improved because the fixed costs used in manufacturing and selling running 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, 20Y1 Cross Training Shoes Golf Shoes Running Shoes Fixed costs 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, 201 Cross Training Shoes Golf Shoes Running Shoes Fixed costs 10000 00000 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 shoes line were eliminated, then the contribution margin of the product line would Thus, the profit of the company would actually prices, by volume, or and the foxed costs ( be eliminated. Management should keep the line and attempt to improve the profitability of the product costs