Vinslow Inc, manufactures and selis 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, 20Y1 In addition, you have determined the following information with respect to allocated foxed costs: These fixed costs are used to support bll three product lines and will not change with the eimination 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 declded 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 $38,700. a. Are management's decision and conclusions correct? Are management's decision and conclusions correct? Ianagement's decision and conclusion are . The prorit be improved becasse the ficed costs used in manufacturing and selling unning shoes be avolded if the line is eliminated. Chea Hy Work Consider the impact the elimination of the running shoe line would have on the fixed conts. Prepare a variable costing income statement for the three products. Enter a net loss as a neqative number using a minus sign. T Cheak wr wos. When recasting the variable costing income statoment, remember that under varlable costing, all fixed factory overhead costs are deducted in the peried incurred, Revenues - Variable Cost of Goods Sold = Manufocturing Margin; Manufacturing Margin - Variable Selling and Administrative Expenses = Contribution Margin; Contribution Margin - (Fixed Manufacturing Costs + Fixed Seling and Administrative Expenses) = Operating incame c. Use the report in (b) to determine the profit impact of eliminating the ruring shoe line, assuming no other changes. If the running shoes line were eliminated, then the contribution margin of the product line would. -. Management should keep the line and attenpt to improve the: by 5 and the fred costs