Winslow Inc. manufactures and sells three types of shoes. Theincome statements prepared under the absorption costing method forthe three shoes are as follows: Winslow Inc. Product IncomeStatements—Absorption Costing For the Year Ended December 31, 20Y11 Cross Training Shoes Golf Shoes Running Shoes 2 Revenues$880,000.00 $685,000.00 $635,000.00 3 Cost of goods sold 420,000.00339,200.00 416,000.00 4 Gross profit $460,000.00 $345,800.00$219,000.00 5 Selling and administrative expenses 411,200.00243,800.00 362,300.00 6 Income (Loss) from operations $48,800.00$102,000.00 $(143,300.00) In addition, you have determined thefollowing information with respect to allocated fixed costs: 1Cross Training Shoes Golf Shoes Running Shoes 2 Fixed costs: 3 Costof goods sold $127,500.00 $89,700.00 $120,000.00 4 Selling andadministrative expenses 94,300.00 82,400.00 143,300.00 These fixedcosts are used to support all three product lines and will notchange with the elimination of any one product. In addition, youhave determined that the effects of inventory may be ignored. Themanagement of the company has deemed the profit performance of therunning shoe line as unacceptable. As a result, it has decided toeliminate the running shoe line. Management does not expect to beable to increase sales in the other two lines. However, as a resultof eliminating the running shoe line, management expects theprofits of the company to increase by $143,300. Required: a. Do youagree with management’s decision and conclusions? Explain youranswer. (Note: You may wish to complete part (b), the variablecosting income statement, first.) b. Prepare a variable costingincome statement for the three products. Refer to the lists ofLabels and Amount Descriptions for the exact wording of the answerchoices for text entries. Be sure to complete the statementheading. A colon (:) will automatically appear if it is required.If a net loss is incurred, enter that amount as a negative numberusing a minus sign. Enter all other amounts as positive numbers. c.Use the report in (b) to determine the profit impact of eliminatingthe running shoe line, assuming no other changes. Use the minussign to indicate a decline in profit. Labels December 31, 20Y1Fixed costs For the Year Ended December 31, 20Y1 AmountDescriptions Contribution margin Contribution margin ratio Fixedmanufacturing costs Fixed selling and administrative expensesIncome (Loss) from operations Manufacturing margin Revenues Salesmix Total fixed costs Variable cost of goods sold Variable sellingand administrative expenses b. Prepare a variable costing incomestatement for the three products. Refer to the lists of Labels andAmount Descriptions for the exact wording of the answer choices fortext entries. Be sure to complete the statement heading. A colon(:) will automatically appear if it is required. If a net loss isincurred, enter that amount as a negative number using a minussign. Enter all other amounts as positive numbers. Score: 86/156Winslow Inc. Variable Costing Income Statement—Three Product LinesFor the Year Ended December 31, 20Y1 ? 1 Cross Training Shoes GolfShoes Running Shoes 2 Revenues ? $880,000.00 ? $685,000.00 ?$635,000.00 ? 3 Variable cost of goods sold ? 292,500.00 ?249,100.00 302,750.00 4 Manufacturing margin ? $587,500.00 ?$455,900.00 $322,250.00 5 Variable selling and administrativeexpenses ? 319,400.00 17,500.00 203,000.00 6 Contribution margin ?$268,100.00 $276,400.00 $119,250.00 7 Fixed costs: ? 8 Fixedmanufacturing costs ? $126,500.00 $90,500.00 $119,250.00 9 Fixedselling and administrative expenses ? 94,600.00 83,000.00142,000.00 10 Total fixed costs ? $22,100.00 $173,500.00$261,250.00 11 Income (Loss) from operations ? $47,000.00$102,900.00 $(142,000.00) Points: 20.95 / 38 Check My Work Whenrecasting the variable costing income statement, remember thatunder variable costing, all fixed factory overhead costs arededucted in the period incurred. Revenues - Variable Cost of GoodsSold = Manufacturing Margin; Manufacturing Margin - VariableSelling and Administrative Expenses = Contribution Margin;Contribution Margin - (Fixed Manufacturing Costs + Fixed Sellingand Administrative Expenses) = Income from Operations