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 $533,200 $335,900 $278,800 Cost of goods sold (277,300) (164,600) (186,800) Gross profit $255,900 $171,300 $92,000 Selling and administrative expenses (220,100) (123,300) (153,600) Operating income $35,800 $48,000 $(61,600) In addition, you have determined the following information with respect to allocated fixed costs: Cross Golf Running Training Shoes Shoes Shoes Fixed costs Cost of goods sold 585,300 $43,700 $39,000 Selling and administrative expenses 64,000 40,300 39,000 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 lonored 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 Revenues Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed manufacturing costs Fixed selling and administrative expenses JQ00 dodd JDOD DODO Que Total fixed costs Operating income (loss) Feedback Check My Work When recasting the variable costing income statement, remember that under variable costing, all fixed factory overhead costs are - Variable Selling and Administrative Expenses - Contribution Margin; Contribution Margin - (Fixed Manufacturing Costs + Fixed Selling and Administrative Expenses) - Operating income 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 and the fixed costs would not be eliminate Thus, the profit of the company would actually decline by s 11,800 x . Management should keep the line and attempt to improve the profitability of the product by increasing prices, increasing volume, or reducing costs Feedback he