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	$333,700		$206,900		$177,900
Cost of goods sold	173,500		101,400		119,200
Gross profit	$160,200		$105,500		$58,700
Selling and administrative expenses	137,800		76,000		98,000
Income (loss) from operations	$22,400		$29,500		$(39,300)

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	$53,400		$26,900		$24,900
Selling and administrative expenses	40,000		24,800		24,900

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 $39,300.

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 be avoided if the line is eliminated.

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b. 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.

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	$	$	$
Income from operations	$	$	$