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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 Statements-Absorption Costing For the Year Ended December 31, 20Y1 Cross Training Shoes Golf Shoes Running Shoes Revenues Cost of goods sold Gross profit Selling and administrative expenses Income (loss) from operations In addition, you have determined the following information with respect to allocated fixed costs $537,900 279,700 $258,200 222,100 $36,100 $317,400 155,500 $161,900 116,600 $45,300 $263,400 176,500 $86,900 145,100 $(58,200) Cross Training Shoes Golf Running Shoes Shoes Fixed costs: Cost of goods sold $86,100 $41,300 $36,900 Selling and administrative expenses 64,500 38,100 36,900 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 $58,200 a. Are management's decision and conclusions correct? Management's decision and conclusion are manufacturing and selling running shoes The profit be avoided if the line is eliminated. be improved because the fixed costs used in 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 Statements-Three Product Lines For the Year Ended December 31, 20Y1 Cross Training Shoes Golf Shoes Running Shoes Fixed costs: Total fixed costs Income from operations c. Use the report in (b) to determine the profit impact of eliminating the running shoes line, assuming no other changes. If the running shoes line were eliminated, then the contribution margin of the product line would and the fixed costs be eliminated. Thus, the profit of the company would actually by Management should keep the line and attempt to improve the profitability of the product by prices volume, or costs

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