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 Gress prefe Selling and administrative expenses Operating income $322.300 $186.900 $160.700 (167,600) (91.600) (107.700) $154,700 $95.000 $53.000 (133.000) (68.600) (8.500) $21.700 $26.700 35.500) In addoen, you have determined the following information with respect so allocated fived costa Cross Golf Running Training Shoes Shoes Shoes Fixed costs Cost of goods sold Selling and administrative expenses $51.600 $24.300 $22.500 28.700 22.400 22.500 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 increa 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 $35.500 a. Are management's decision and conclusions comed Management's decision and conclusion are incorrect. eliminated There will not be improved because the fixed costs used in manufacturing and selling running shoes will not be avoided if the fine is b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign Revenues Winslow Inc. Variable Costing Income Statements-Three Product Lines For the Year Ended December 31, 201 Cross Training Shoes Golf Shoes Running Shoes 322.300 106.900 140.700 Variable cost of goods sold Manufacturing margin Variable selling and administrative IZDEL Cantobution.marsin Fixed coats Ened manufacturing casts Fixed selling and administrative expenses Total fixed costs Operating income (less) 10000 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 by and the fixed cost Management should keep the line and attempt to improve the profitability of the product by prices be aliminated. Thus the profe of the company would actually vanable Md 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 Ravenues Cost of goods sold Gross profit Selling and administrative expenses Operating income $322.300 $186,900 $160.700 (167.600) (91.600) (107.700) $154.700 $95.300 $53.000 (133.000) (68,600) (88.500) $21.700 $26.700 $35.500) In addition, you have determined the following information with respect to allocated fixed costs Fixed costs Cost of goods sold Selling and administrative expenses Cross Golf Running Training Shoes Shoes Shoes $51.600 $24.300 $22.500 38.700 22.400 22.500 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 $35.500. a. Are management's decision and conclusions correct? Management's decision and conclusion are incorrect eliminated. The profit will not be improved because the flued costs used in manufacturing and selling running shoes will not be avoided if the line is b. Prepars 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 Revenues Variable cost of goods sold Manufacturing margin Variable selling and administrative genes Contribution margin Fixed costs Eixed manufacturing costs Fixed selling and administrative expe Total fixed costs Operating income (loss) Cross Training Shoes 322.300 Golf Shoes Running Shoes 106.900 140.700 21.700 26.700 -35500 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 by and the fixed costs Management should keep the line and attempt to improve the profitability of the product by be eliminated. Thus, the profie of the company would actuall prices