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 StatementsAbsorption Costing

For the Year Ended December 31, 20Y1Cross Training ShoesGolf ShoesRunning ShoesRevenues$333,400$196,700$167,200Cost of goods sold173,40096,400112,000Gross profit$160,000$100,300$55,200Selling and administrative expenses137,60072,20092,200Income (loss) from operations$22,400$28,100$(37,000)

In addition, you have determined the following information with respect to allocated fixed costs:

Cross Training ShoesGolf ShoesRunning ShoesFixed costs:Cost of goods sold$53,300$25,600$23,400Selling and administrative expenses40,00023,60023,400

These fixed costs are used to support all three product lines. In addition, you have determined that the inventory is negligible.

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 $37,000.

1. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign; enter all other amounts as positive numbers.

2.Use the report in (b) to determine the profit impact of eliminating the running shoes line, assuming no other changes. SOLVE FOR (?????)

If the running shoes line were eliminated, then the contribution margin of the product line wouldbe eliminatedand the fixed costswould not

be eliminated. Thus, the profit of the company would actuallydeclineby (????????) $. Management should keep the line and attempt to improve the profitability of the product byincreasingprices, increasingvolume, orreducingcosts.