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 $490,400 $309,000 $262,700 Cost of goods sold (255,000) (151,400) (176,000) Gross profit $235.400 $157,600 $86,700 Selling and administrative expenses (202,400) (113,500) (144,800) Operating income $33,000 $44,100 $(58,100) In addition, you have determined the following information with respect to allocated fixed costs: Cross Training Shoes Golf Shoes Running Shoes Fixed costs: Cost of goods sold $78,500 $40,200 $36,800 Selling and administrative expenses 58,800 37,100 36,800 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 anored. 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 $58,100. a. Are management's decision and conclusions correct? Management's decision and conclusion are The profit be improved because the fixed costs used in manufacturing and selling running shoes be avoided if the line is eliminated 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, 2011 Cross Training Shoes Golf Shoes Running Shoes Fixed costs: Total fixed costs Total fixed costs Operating income (loss) 89 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 be eliminated. Thus, the profit of the company would actually by $ the line and attempt to improve the profitability of the product by prices, and the fixed costs Management should keep volume, or costs