1. 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, 20Y1
   	Cross Training Shoes		Golf Shoes		Running Shoes
   Revenues	$389,300		$229,700		$195,200
   Cost of goods sold	(202,400)		(112,600)		(130,800)
   Gross profit	$186,900		$117,100		$64,400
   Selling and administrative expenses	(160,700)		(84,300)		(107,500)
   Operating income	$26,200		$32,800		$(43,100)

   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	$62,300		$29,900		$27,300
   Selling and administrative expenses	46,700		27,600		27,300

   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 $43,100.

   a. Are managements decision and conclusions correct?

   Managements decision and conclusion are incorrect . The profit will not be improved because the fixed costs used in manufacturing and selling running shoes will not

   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 StatementsThree 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
   Total fixed costs	$	$	$
   Operating income (loss)	$	$	$

   be avoided if the line is eliminated.