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 Cost of goods sold Gross profit Selling and administrative expenses Operating Income $341,500 $215,100 $182,800 (177,600) (105,400) (122,500) $163,900 $109,700 $60,300 (141,000) (79,000) (100,700) $22,900 $30,700 $(40,400) 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 Training Shoes Golf Running Shoes Shoes $54,600 $28,000 $25,600 41,000 25,800 25,600 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. 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 $40,400.