variable and Absorption Costing-Three Products Fleet-of-Foot inc, manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as followe: Fleat-of-Foot inc. Product income Statements-Absorption costing In addicion, you have detarmined the fellowing information with respect to allocited fixed costs: These fives costy are used to support ail three product lines and wilf not change with the elimination of any one poduct. In additiani you have deterrnined that the effette ef: invertory may be laniored. In addrion, your hawe determined the folowing information with respeict to allocited fixed costr: Thiete food costs ate used to ripport at three product lines and will not change with the elimination of any ose product. In addition, yee have determined that the effects of diventery max be ignored. The managemant of the company fas deemed the profit performance of the rinring shoe lne as unacceptable; As a result, it has decided to eliminate the nunning ahee line Management does not expect to be able to incresse sales in the other two lnes. Howsver, as a result of eliminating the runving shioe Ine. managamnat espects the prafits of the company to increase ty 559,300 . a. Are management's decisiot and constusions correct? Managrment's decisich and canclusion are V. The profit. be improwed because the fred costs used in manutacturing and seiling running ahoes be aveided at the line in euminated. Chapter 7 Homework obook Fleet-of-Foot Inc. Variable Costing Income Statements-Three Product Lines For the Year Ended December 31 Fixed costs: Flked manutacturing casts Total fixnd costs Operating incime (loss) Fesoback F chect verwion * ChockMy Wol Contributien Marzin : (fixed Manufacturine. Costs + Fixed tletitig and Administrative Expenses) = Operating incoma c. Use the repart in (b) to determine the ptofe impact of aliminating the funning shoe line, assuming. no other changes. If the hnning shoes line were efimainated, then the coatribution. margin of the product line viould Iiand the foxed costs Beg-eliminated. Thes, the profit of the company would actually Management should keep the line and attempt to lmprove the profitabilfy of the product by poices. volume, of costs. freobetk T Chret My Wurk Considet the impact the elimination of the running shoe fine would have on sales as woll as variable and fixed costs